UK Trade & Investment

International Business Strategies, Barriers & Awareness Monitoring Survey 2010

Research Report

June 2010

JN: 4229 Contents

01. Executive Summary ........................................................................................................ 1 1.1 Introduction ........................................................................................................... 1 1.2 Summary Results .................................................................................................. 2

02. Introduction .................................................................................................................. 12

03. Research Objectives .................................................................................................... 13

04. Methodology ................................................................................................................ 14 4.1 Coverage .............................................................................................................. 14 4.2 Sample Design ..................................................................................................... 14 4.3 Questionnaire Design ........................................................................................ 15 4.4 Fieldwork ............................................................................................................ 15 4.5 Weighting ............................................................................................................ 16 4.6 Statistical Significance ....................................................................................... 16

05. Modes of Internationalisation ..................................................................................... 17 5.1 Modes Used ......................................................................................................... 17 5.2 Number of Modes Used ..................................................................................... 23

06. Profile .......................................................................................................................... 25 6.1 Age of Business .................................................................................................. 25 6.2 Size of Business (Employees) ........................................................................... 27 6.3 Size of Business (Turnover) .............................................................................. 29 6.4 Industry Sector ................................................................................................... 31 6.5 Ownership .......................................................................................................... 32 6.6 Experience of Doing Business Overseas ......................................................... 33 6.7 Innovation .......................................................................................................... 45 6.8 Growth ................................................................................................................ 50 6.9 Business Planning ............................................................................................. 58 6.10 Customer Types ............................................................................................... 59 6.11 Profile of UKTI Users: Internationalisation Survey vs. PIMS ....................... 61

07. Awareness & Usage ...................................................................................................... 62 7.1 Awareness & Use of UKTI .................................................................................. 62 7.2 Awareness & Use of Business Link .................................................................... 65

08. Drivers of Market ......................................................................................................... 66 8.1 Drivers of Market (Summary) ............................................................................ 66 8.2 Drivers of Market (Detailed) ............................................................................. 69

09. Barriers to Overseas Trade ......................................................................................... 71 9.1 Barriers (Summary) ............................................................................................ 71 9.2 Barriers (Detailed) ............................................................................................. 84

10. Benefits of Doing Business Overseas ....................................................................... 96 10.1 Benefits ............................................................................................................. 96 10.2 Impact on Product & Service Development .................................................... 101

11. Opportunities in Emerging & Fast Growing Markets ........................................ 110 11.1 Opportunities in Emerging & Fast Growing Markets .............................. 110 11.2 Influence of Economic Downturn .......................................................... 115

12. Impact of Economic Downturn .................................................................... 118 12.1 Product & Service Development ............................................................ 118 12.2 Sterling Exchange Rates ....................................................................... 122 12.3 Access to Finance ................................................................................ 128 12.4 Export Credit Insurance ....................................................................... 132

13. Marketing Channels ..................................................................................... 135 13.1 Channels Used ..................................................................................... 135 13.2 Usefulness ........................................................................................... 138 13.3 Marketing UKTI Services ..................................................................... 141 13.4 Social Networking Sites ....................................................................... 144

Annex A – Markets Selected (For Drivers & Barriers Questions)

Annex B – Questionnaire

1. Executive Summary

1.1 Introduction

This research gathers evidence about trends in UK businesses’ international business strategies, barriers hindering such business, awareness and usage of UKTI, and related issues.

In terms of the specific research aims, the study was required to provide robust evidence to:

- Help understand the role of international market diversification in business development strategies;
- Identify drivers of geographical focus;
- Identify links between innovation, R&D and overseas business development, and the impact of the economic downturn on this relationship;
- Understand the barriers encountered by UK businesses in seeking to develop overseas business;
- Measure awareness and use of UKTI support;
- Identify the extent to which credit conditions and related issues are impacting on firms’ overseas business development;
- Provide evidence on the characteristics of users and non-users of UKTI.

This summary outlines the key findings from this study. Please note that all of the data in this report has been weighted by age of firm to reflect a disproportionate stratified sampling approach. 1.2 Summary Results

1.2.1 Internationalisation Modes

Firms were asked which of a number of internationalisation modes they had been involved in over the last five years (or were planning to do in the next year in the case of those that were not yet doing any business overseas(^1)).

| Table 1.2.1 Modes Of Internationalisation | |------------------------------------------| | **Base** | **Total** | **UKTI Usage** | **UKTI User** | **Non-User** | | | | | | | | Selling direct | 91% | 91% | 91% | | Agents/distributors | 42% | 60% | 35% | | Contractual arrangements | 9% | 13% | 7% | | Overseas site | 13% | 17% | 12% | | - Manufacturing/assembly | 3% | 3% | 3% | | - Call centre | 1% | 1% | 1% | | - Sales/service delivery | 11% | 15% | 10% | | - R&D | 4% | 4% | 4% | | Importing | 58% | 62% | 57% |

Almost all internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. However, only around 1 in 10 are involved in other ‘contractual arrangements’ (such as licensing or franchising) or operate their own overseas sites.

Whilst the proportion selling direct is identical for users and non-users of UKTI services, the former are significantly more likely to also adopt alternative internationalisation modes, such as selling through agents or distributors. The same is true of larger firms, those with greater overseas experience and those defined as being innovative.

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(^1) Please note that 44 of the 902 firms interviewed (5%) were not yet doing business overseas but qualified for the research on the basis that they were planning to do so in the next year. 1.2.2 Profile

The table below provides key profile information for internationalising firms, including comparisons between users and non-users of UKTI.

| Table 1.2.2 Profile | |---------------------| | **UKTI Usage** | | **Total** | | **UKTI User** | | **Non-User** | | **Base** | | 902 | | 235 | | 667 | | **Age** | | 0-5 years | | 17% | | 12% | | 19% | | 6-10 years | | 23% | | 24% | | 23% | | Over 10 years | | 60% | | 65% | | 58% | | **Size (employees)**| | 0-9 employees | | 56% | | 52% | | 57% | | 10-249 employees | | 38% | | 40% | | 37% | | 250+ employees | | 5% | | 7% | | 4% | | **Sector** | | Primary | | 1% | | 0% | | 1% | | Production | | 35% | | 39% | | 34% | | Construction | | 1% | | 2% | | 1% | | Services | | 63% | | 58% | | 64% | | **Innovation** | | Innovative | | 76% | | 85% | | 72% | | Innovative (alternative) | | 44% | | 53% | | 41% | | IP active | | 25% | | 37% | | 21% | | **Overseas experience** | | Less than 2 years | | 15% | | 11% | | 17% | | 2-10 years | | 45% | | 46% | | 45% | | Over 10 years | | 38% | | 42% | | 36% | | **Number of markets** | | Up to 5 markets | | 43% | | 31% | | 47% | | 6-10 markets | | 24% | | 24% | | 24% | | Over 10 markets | | 32% | | 44% | | 27% | | **Growth objectives (next 5 years)** | | Grow substantially | | 25% | | 31% | | 23% | | Grow moderately | | 58% | | 55% | | 59% | | Same/smaller | | 15% | | 11% | | 16% | | **Business plan** | | Yes | | 57% | | 68% | | 53% | | No | | 38% | | 27% | | 42% |

UKTI users and non-users have broadly similar characteristics in terms of age and size, although the former have a slightly older and larger profile. UKTI users are also somewhat more likely to be operating in the production sector than non-users.

Perhaps the most notable differences between users and non-users of UKTI services are in the area of innovation. The former are significantly more likely to be classed as ‘innovative’ (by both definitions) and as being ‘IP active’ (i.e. holding some form of legal protection for any of their products or services).

UKTI users also tend to have been doing business overseas for longer and, more notably, operate in a significantly greater number of markets. They also appear to be more ambitious in terms of their growth objectives and are more likely to have a current business plan which suggests they take a more strategic approach to the development of their business. 1.2.3 Awareness & Usage of UKTI

Firms were asked whether they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas, and whether they had used either of these.

Table 1.2.3 Awareness & Use of UKTI

| | Total | UKTI Usage | Total 2008 survey | |--------------------------------|-------|------------|-------------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Aware (at least one) | | 100% | 55% | | - UK Trade & Investment or UKTI| 51% | 84% | 39% | | - Commercial services provided by embassies and consulates overseas | 53% | 85% | 40% | | Used (at least one) | 27% | 100% | 0% |

Around two-thirds (68%) of internationalising firms have heard of either UKTI or the services provided by overseas posts, and just over a quarter (27%) have used UKTI services. There has been no change in awareness levels over the last 2 years, with identical results recorded in the 2008 survey.

However, awareness of the UK Trade & Investment name itself stands at only 51%, meaning that only 84% of UKTI users have actually heard of ‘UK Trade & Investment’ (i.e. 16% have used the services provided by overseas posts but not realised the link to UKTI).

Amongst non-users of UKTI overall awareness stands at 55%, clearly demonstrating that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation.

Awareness and usage levels increase amongst older and larger firms, and those with more experience of doing business overseas. It is also clear that innovative and IP active firms are more engaged with UKTI, with awareness and usage levels significantly higher amongst these groups. Encouragingly, awareness and usage of UKTI are particularly high amongst innovative firms that are planning for substantial growth over the next 5 years (at 76% and 37% respectively). 1.2.4 Barriers to Overseas Trade

Firms were asked to identify the ‘most challenging’ overseas market in which they had done business over the last 5 years, and were then read out a number of potential difficulties and asked to indicate the extent to which they had encountered each one in this market. These were then combined into 7 summary barriers, and the table below shows the proportion of firms experiencing ‘significant’ difficulties with each one.

Table 1.2.4 Summary Barriers

| Base: All exporters | Total | UKTI Usage | |---------------------|-------|------------| | | | UKTI User | Non-User | | At least one significant barrier | 858 | 227 | 631 | | - Legal & regulatory barriers | 66% | 77% | 62% | | - Customs barriers | 41% | 53% | 36% | | - Contacts barriers | 27% | 34% | 24% | | - Information barriers | 27% | 37% | 24% | | - Resource barriers | 16% | 21% | 14% | | - Language & cultural barriers | 20% | 25% | 18% | | - Bias barriers | 19% | 23% | 18% | | No significant barriers | 34% | 23% | 38% |

Overall, two-thirds of internationalising firms have experienced at least one significant barrier in their selected market, suggesting there is a clear need for external assistance to help firms overcome these barriers and successfully trade overseas.

Reflecting the results from previous UKTI studies, legal and regulatory barriers and contacts barriers are highlighted as being the most important (experienced by 41% and 27% of firms respectively). Customs barriers is a new area that has not been covered in previous UKTI surveys, but also appears to be a widespread concern for internationalising firms, with 27% claiming that it has been a significant difficulty.

UKTI users encounter more significant barriers than non-users, with 77% experiencing at least one, compared to just 62% of non-users. Given that firms were asked to focus on their ‘most challenging’ market, this difference between users and non-users could purely be a function of their different export profiles as UKTI users typically operate in more markets and are also more likely to be doing business in high growth or emerging markets (and hence have more potential to be exposed to ‘challenging’ markets). However, when further analysis is conducted based just on those firms answering about a high growth/emerging market, the difference between users and non-users is still evident, and the same is true when further analysis is conducted focussing just on those firms operating in more than 10 markets. This suggests that there is a ‘true’ distinction between users and non-users and the increased likelihood of users reporting barriers is not just a result of UKTI users operating in more challenging markets.

More experienced exporters, innovative firms and those using less traditional internationalisation modes (i.e. not just selling direct to customers) are all more likely to experience significant barriers to overseas trade. 1.2.5 Benefits of Doing Business Overseas

All firms were read out a number of possible benefits of doing business overseas and asked to indicate the extent to which each one applied to them. The table below shows the proportion benefiting significantly from each one.

Table 1.2.5.1 Summary Benefits

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | At least one sig. benefit | 54% | 69% | 49% | | - Level of growth otherwise not possible | 38% | 48% | 34% | | - More fully utilising capacity | 30% | 38% | 28% | | - Exposure to new ideas | 28% | 38% | 24% | | - Increased lifespan of products/services | 22% | 33% | 18% | | No sig. or mod. benefit | 23% | 13% | 27% |

The most widespread benefit of internationalising is that it enables firms to achieve a level of growth otherwise not possible, with 38% of firms indicating that they have benefited in this way to a significant extent. Over a quarter of firms also benefited from being able to better use their existing capacity and through being exposed to new ideas. Whilst it is the least widespread of the benefits tested, over a fifth of firms have also benefited significantly through exporting increasing the commercial lifespan of their products or services.

As well as encountering more barriers to their overseas development, it is clear that UKTI clients also experience consistently greater benefits from overseas trade, with 69% reporting at least one significant benefit compared to only 49% of non-users.

As might be expected, the longer a firm has been doing business overseas and the more markets they operate in, the more likely they are to report significant benefits. Perhaps linked to this, older and larger firms also tend to have experienced greater benefits from overseas trade.

Internationalisation also seems to have more positive outcomes for innovative and IP active firms. The same is true for those planning for ‘substantial’ growth over the next 5 years, and it may be that the level of benefit that these firms are experiencing through their overseas activity has influenced their ambitious growth predictions. Firms were also asked whether doing business overseas had prompted them to either develop new products/services or modify existing ones.

Table 1.2.5.2 Impact On Product/Service Development

| | Total | UKTI Usage | |------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Develop new products/services | 38% | 44% | 36% | | Change/modify existing ones | 46% | 56% | 42% | | Neither | 46% | 35% | 51% |

Just over half of all firms (53%) reported some degree of impact on their product or service development activity, with 38% indicating that doing business overseas had prompted them to develop new products or services and 46% that it had encouraged them to change or modify existing products or services. UKTI users are significantly more likely to report both of these impacts.

Where the impact on product/service development related to changing or modifying existing products, in most cases this was felt to be a fundamental change rather than just cosmetic changes (such as packaging or translation).

Firms were also asked about the extent to which internationalisation impacts on investment in product and service development activity.

Table 1.2.5.3 Impacts On Investment In Product/Service Development

| | Total | UKTI Usage | |------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Invest more time and money in NPD | 38% | 50% | 34% | | Increase money available for NPD | 37% | 46% | 34% | | Increase ROI in NPD | 46% | 60% | 41% |

There is clear evidence that internationalisation can increase the financial rewards of innovation activity, with approaching half of all firms reporting that doing business overseas had increased the return they received from their investment in product or service development. Over a third felt that doing business overseas had encouraged them to invest more resources in these activities, and a similar proportion indicated that it had enabled them to invest more money in product or service development activity, 1.2.6 Opportunities in Emerging & Fast Growing Markets

Firms were read out a list of various emerging or fast growing markets and asked whether they were already doing business there, were very likely to do so in the next 2 years, quite likely to do so or unlikely to do so. They were also asked whether the economic downturn had prompted them to focus more attention on emerging or fast growing markets.

Table 1.2.6 Opportunities In Emerging & Fast Growing Markets

| | Total | UKTI Usage | Non-User | |--------------------------------|-------|------------|----------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Likelihood of entering any emerging / fast growing markets in next 2 years | | | | | Already in | 48% | 61% | 44% | | Very likely | 10% | 11% | 9% | | Quite likely | 22% | 18% | 23% | | Unlikely | 19% | 10% | 22% | | Whether devoted more attention to emerging / fast growing markets as result of downturn | | | | | Yes | 26% | 33% | 23% | | No | 74% | 67% | 77% |

As seen above, almost half (48%) of internationalising firms are already doing business in at least one of the emerging/fast growing markets, and most of the remainder feel that they are very or quite likely to do so in the next 2 years. This increases amongst UKTI users, and only 10% of this group feel that they are unlikely to be doing business in any fast growing markets in 2 years time.

In terms of specific markets, Saudi Arabia and the UAE were felt to represent the best opportunities, followed by South Africa, China and India. However, firms were less positive about their likelihood of doing business in Brazil or Mexico.

The likelihood of a firm trading in these fast growing markets increases with both age and size, and there is also clear evidence that firms tend to enter fast growing markets later in their international life-cycle, with those that have been exporting longest significantly more likely to be operating in these markets. However, it is not the case that these markets are only targeted by more established firms, as over a third of firms in the youngest age band (established up to 5 years) and the smallest size band (0-9 employees) are already doing business in at least one of these areas.

It appears that the recent economic conditions have had a considerable effect on the extent to which firms are targeting emerging and fast growing economies, with a quarter of internationalising firms indicating that they have devoted more attention to these markets as a direct result of the downturn. This is more likely to be the case amongst UKTI users. 1.2.7 Impact of Economic Downturn

Those firms that carried out any product or service development activity were asked whether the economic downturn had affected either the amount spent on these activities or their geographical focus. Please note that the analysis below is based only on those firms that carry out or commission product or service development.

Table 12.7.1 Impact Of Downturn On Product/Service Development

| | Total | UKTI Usage | | | |--------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base: All doing NPD | 585 | 183 | 402 | | Impact on Amount Spent on Product/Service Development | | | | | Spending more | 21% | 17% | 23% | | Spending less | 25% | 28% | 23% | | No impact | 53% | 55% | 52% | | Don't know | 1% | 1% | 2% | | Impact on Geographical Focus of Product/Service Development | | | | | More for overseas | 29% | 32% | 27% | | Less for overseas | 12% | 11% | 13% | | No change | 58% | 58% | 58% | | Don't know | 1% | 0% | 1% |

There has been a fairly even split in terms of how firms have reacted to the economic downturn, with a quarter of those firms that undertake product or service development spending less on these activities but a fifth opting to spend more.

There has also been considerable impact in terms of the geographic focus of innovation activities, with almost a third indicating that more of their product/service development is aimed specifically at overseas customers than was the case previously.

UKTI users are slightly more likely to have reduced their investment in product/service development, but they are also more likely to have adjusted the balance of these activities in favour of overseas markets. It is also the case that innovative firms are significantly more likely to have increased the product/service development spend as a result of the economic conditions. All firms were asked to assess the overall impact of the recent decline in Sterling exchange rates on their business, and whether they would attempt to increase the share of their business accounted for by overseas sales if the situation continued.

Table 1.2.7.2 Impact Of Sterling Exchange Rates

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 |

**Impact of Recent Decline in Exchange Rates**

| Impact | Total | UKTI User | Non-User | |-------------------------------|-------|-----------|----------| | Positive impact | 27% | 33% | 25% | | Negative impact | 35% | 34% | 36% | | No impact | 36% | 31% | 38% | | Don't know | 2% | 2% | 2% |

**Whether Will Prompt to Increase Share of Business from Overseas Sales**

| Whether | Total | UKTI User | Non-User | |---------|-------|-----------|----------| | Yes | 40% | 47% | 37% | | No | 55% | 50% | 57% | | Don't know | 5% | 3% | 6% |

The decline in Sterling exchange rates has had a mixed impact on internationalising firms, with around a quarter reporting a net positive impact but a third reporting a negative impact. Two-fifths of firms believe that if the exchange rates stay at a similar level or fall further this will prompt them to try and increase the share of their business accounted for by overseas sales.

UKTI users are marginally more likely to feel that the recent changes in Sterling exchange rates have had a positive impact on their business, and are also more likely to try and increase their overseas sales if the situation continues.

There is a clear correlation between overseas experience and the impact of the recent fall in Sterling exchange rates, with those firms that have been exporting the longest, operate in the most markets and have the highest proportion of their turnover accounted for by overseas sales all more likely to report a positive impact. However, as expected, importers are more likely to report a negative impact on their business from the fall in Sterling exchange rates. 1.2.8 Marketing Channels

All respondents were read out a list of media/communication channels and asked to indicate which ones they personally used to obtain news or information relevant to their business. For each one used they were then asked to rate its usefulness, and they were also asked to indicate which channel they thought would be the best way for UKTI to let them know about a new service they were providing.

Table 12.8.1 Marketing Channels

| Base | % using | % rating as useful | % selecting as best UKTI channel | |-----------------------|---------|--------------------|----------------------------------| | Base | All respondents (902) | All using channel (91-742) | All respondents (902) | | Websites | 82% | 70% | 28% | | Trade press | 72% | 53% | 24% | | Seminars, etc | 68% | 63% | 4% | | Magazines | 49% | 39% | 3% | | National newspapers | 37% | 25% | 5% | | Social networking | 28% | 45% | 3% | | TV | 24% | 22% | 4% | | National radio | 18% | 23% | 1% | | Local newspapers | 16% | 20% | 1% | | Local radio | 10% | 17% | 1% |

Websites, the trade press and attendance at seminars, tradeshows and conferences are the most widely used channels for business news and information.

The perceived usefulness of the various channels generally reflects the usage patterns, with those channels that are most widely used also being rated as most useful. However, an interesting exception to this is social networking sites, which were used for business purposes by only 28% of respondents but were rated as being useful by 45% of users.

When it came to the most effective channel for UKTI to publicise a new service, websites and the trade press again emerged as the key mediums. 2. Introduction

UK Trade & Investment (UKTI) commissioned this piece of research in order to gather evidence about trends in UK businesses’ international business strategies, barriers hindering such business, awareness and usage of UKTI, and related issues.

The study was designed with a view to the results being used to help inform UKTI policy development and other aspects of UK Government policy relating to international trade and investment and the ability of British business to optimise opportunities in global markets.

The survey was intended to complement evidence already available from other surveys of UK business, in particular:

- The Community Innovation Survey, which is nationally representative of firms with at least 10 employees, and captures some evidence about international aspects of innovation activity, including international partnerships and other linkages, as well as export activity;

- UKTI’s Performance and Impact Monitoring Survey (PIMS) of businesses who have used UKTI trade services, which also captures some contextual evidence about overseas business experience and aspects of strategy;

- UKTI’s annual survey of exporters who have not used UKTI trade services, which gathers evidence about some aspects of overseas business strategy as well as evidence about barriers to overseas business and associated needs for external help.

The ‘International Business Strategies, Barriers & Awareness Monitoring Survey’ replaced the former annual UKTI awareness survey. It is undertaken on an annual basis, and this is the third wave conducted to date. Whilst the core content of the survey is kept consistent each year, there is variation in some of the topics covered. This ensures that annual monitoring with consistent data can be achieved where needed, as well as capturing data on a wider range of issues at less frequent intervals. 3. Research Objectives

In terms of the specific research aims, the study was required to provide robust evidence to:

- Understand the role of international market diversification in business development strategies, including its effects on revenue growth and resilience, profitability and return on investment in new product development;

- Identify drivers of geographical focus, including awareness of, and potential interest in, emerging and high growth markets (as identified in UKTI’s 5 year strategy, published in 2006);

- Understand links between innovation, R&D and overseas business development, and how the economic downturn is affecting this relationship (including the strategic aims of investment in R&D and innovation activities);

- Understand the barriers encountered by UK businesses in seeking to develop overseas business, both for new exporters and for firms seeking to enter new markets;

  - Subject to the constraints of interview length and sample sizes, identify how these vary across markets.

- Identify awareness and use of UKTI support;

- Identify and assess the extent to which credit conditions and related issues (such as access to trade credit insurance and letters of credit) may be impacting on firms’ international business development, including their investment in R&D and innovation activities;

- Capture evidence about the characteristics of users and non-users of UKTI services, including innovation activity, scope of international business and modes of internationalisation employed.

This study built on the two previous survey waves, replicating the previous methodology so as to provide consistent year-on-year data (where practical), whilst developing the previous questionnaire to ensure that the 2010 objectives were fully addressed. 4. Methodology

The research was conducted via quantitative, CATI(^2) interviews, administered by a specialist team of business-to-business researchers with extensive experience of conducting similar studies with this type of audience.

4.1 Coverage

A total of 902 interviews were conducted with firms involved in overseas business activities covering the full range of internationalisation modes, including selling to overseas customers both directly and via agents or distributors, operating via contractual agreements and firms operating their own overseas sites. Whilst data was collected on import activity, only those firms also involved in other overseas business activities were selected for interview.

Whilst the majority of the firms interviewed (858 of the total 902) were involved in at least one of these forms of internationalisation at the time of the interview, a small number (44) were only planning to become involved in this type of activity (although to be eligible for the study they had to indicate that this was planned in the next year). This latter group have been labelled 'considerers' in the analysis.

4.2 Sample Design

Since one of the key objectives of this research was to ensure coverage of firms doing overseas business via the full range of modes, and not just simply exporting in the traditional sense, the sample frame was built from a random sample of UK businesses which was then screened to identify those engaged in overseas business. This approach had the further advantage of allowing the inclusion of 'considerers' in the research.

The initial sample frame was sourced from a Companies House-based list provided by Experian, with the sample stratified by age of firm. It was decided that a disproportionate sample design would be used, so that a robust number of interviews were conducted with 3 age groups of firms (those established up to 5 years, 6-10 years and over 10 years).

In order that the incidence within the sample frame of firms eligible for interview (i.e. engaging in international business activity) was kept to within sensible limits, an approach was taken to the construction of the initial sample frame whereby a small number of industry sectors with a very low proportion of firms expected to be involved in overseas business activity were excluded(^3). The exclusions were made on the basis of analysis of data from the Community Innovation Survey (CIS) on the incidence of exporting for individual industry sectors by age group(^4). The available data only enabled exclusions to be made at the level of 2-digit SIC codes, but a number of sub-sectors were also excluded based on both common sense and the research team's experiences of the previous surveys and pilot sessions (e.g. sub-post offices, taxi firms, dispensing chemists, etc).

(^2) Computer Assisted Telephone Interviewing. (^3) Sectors where the incidence of exporting firms was likely to be less than 1 in 5 were excluded from the sample frame. (^4) Based on analysis by Professor Richard Harris, University of Glasgow. Whilst both users and non-users of UKTI were included in the research, the sample lists were screened against lists of firms participating in the most recent main PIMS and PIMS Follow-Up surveys so as not to over-burden businesses with too frequent research.

4.3 Questionnaire Design

Strong emphasis was placed on questionnaire design in the early stages of this project, with the importance of ensuring that the questionnaire was easily understandable, clearly worded, flowed logically, acceptable in terms of length and capable of delivering high quality data across all the areas necessary to answer the research objectives recognised throughout the design phase of the study.

Given that some of the question areas had not been covered in previous studies, it was felt that an initial qualitative piloting phase was required to help test and inform the main questionnaire. This consisted of a total of 4 in-depth, less-structured interviews to ensure that the new question areas made sense to respondents and covered all of the pertinent issues.

Following this qualitative phase the quantitative questionnaire was revised where necessary, and then a full ‘live’ quantitative pilot was conducted on CATI. This took place over the course of 2 days and involved OMB executives and UKTI representatives listening to ‘live’ interviews conducted by the telephone research team. Based on this session, further changes were then made to the questionnaire script prior to the start of main fieldwork. A copy of the final questionnaire is appended to this report.

4.4 Fieldwork

Main fieldwork was conducted in February and March 2010, and interviews lasted an average of c.20 minutes.

The following table summarises the number of sample records selected for CATI, the approximate number of records lost due to screening-out or incorrect contact details, and the number of interviews completed along with the associated response rate.

| CATI SCREENING | | |-----------------------------------------------------|----------| | Selection for CATI | 22,006 | | Unusable – no overseas business activity | 15,168 | | Unusable – contact details incorrect | 2,990 |

| ACHIEVED INTERVIEWS / RESPONSE RATES | | |-----------------------------------------------------|----------| | Total useable sample | 3,848 | | Interviews achieved | 902 | | Response rate (%) | 23% | | Refusal rate (%) | 33% | 4.5 Weighting

All of the data presented in this report has been weighted to account for the disproportionate nature of the sample design (i.e. the disproportionate sampling by age of firm). The weighting regime uses data from the 2007/8 Annual Small Business Survey on the age profile of UK exporters (displayed below), with the data weighted to the profile shown.

Table 4.5.1 Weighting

| Age profile of UK exporters (2007/8 ASBS) | Age profile of interviewed firms | Weighting | |------------------------------------------|---------------------------------|-----------| | Up to 5 years | 16.8% | 28.3% | 0.594258824 | | 5-10 years | 23.4% | 24.3% | 0.963780822 | | More than 10 years | 59.8% | 47.5% | 1.260271028 |

4.6 Statistical Significance

Throughout this report, any differences between types of firm that are referred to as being ‘significant’ are statistically significant at the 95% level of confidence. In some cases apparent differences that are not statistically significant at this level have been highlighted, but made clear that they are not significant. 5. Modes of Internationalisation

5.1 Modes Used

Firms were asked which of a list of overseas business activities they had been involved in over the last five years. Those not involved in any of these overseas activities were asked whether they were seriously considering starting to conduct overseas business via any of these routes in the next year, and only those responding positively to this question were invited to take part in the research. This group (the ‘considerers’) were asked to indicate which types of activities they were planning to become involved in.

The chart below shows usage (and consideration for ‘considerers’) of these overseas business activities.

![Chart 5.1.1 Modes Of Internationalisation Used In Last 5 Years (Or Seriously Considering In Next Year For ‘Considerers’)](chart)

The vast majority of internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. However, only around 1 in 10 are involved in other ‘contractual arrangements’ (such as licensing or franchising) or operate their own overseas sites.

Well over half of firms have also imported in the last 5 years (which was defined as buying any goods or services from overseas suppliers). However, please note that firms were not eligible to participate in the research purely on the basis of import activity, and they had to also be involved in one of the outward internationalisation modes to qualify for interview.

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5 Please note that 44 of the 902 firms interviewed (5%) were not yet doing business overseas but were planning to do so in the next year. The table below shows separate analysis of internationalisation modes for firms that are already engaged in overseas business and those that are just planning to start in the next year (i.e. ‘considerers’).

Table 5.1.1 Modes Of Internationalisation – By Active Exporters & Considerers

| Status | Total | Active | Considerer | |-------------------------------|-------|--------|------------| | Base | 902 | 858 | 44 | | Selling direct | 91% | 92% | 67% | | Agents/distributors | 42% | 42% | 43% | | Contractual arrangements | 9% | 9% | 18% | | Overseas site | 13% | 13% | 19% | | - Manufacturing/assembly | 3% | 3% | 0% | | - Call centre | 1% | 1% | 2% | | - Sales/service delivery | 11% | 11% | 15% | | - R&D | 4% | 3% | 9% | | Importing | 58% | 59% | 41% |

As seen above, firms that are just planning to start doing business overseas are comparatively less likely to be looking at selling direct to overseas customers, and more inclined to be considering contractual arrangements or setting up their own overseas site. However, the low base of ‘considerers’ should be taken into account when interpreting these results.

Those firms running their own overseas site(s) were asked to provide details of the main purpose of the site(s).

Table 5.1.2 Main Purpose of Site

| Overseas sites | |-----------------------------------------------------| | Base: All operating/considering overseas sites | 121 | | Manufacturing or assembly | 21% | | Call centre | 7% | | Distribution or sales office | 64% | | Service delivery | 57% | | Research, product or process development | 27% | | Don’t know/refused | 2% |

Most overseas sites are either distribution/sales offices or service delivery sites. However, around a quarter of firms have R&D facilities overseas and a fifth have production sites. Firms with overseas sites were also asked to indicate how many sites it was that they had, with the following results. Please note that ‘considerers’ were not asked this question and have been excluded from the analysis below.

Table 5.1.3 Number of Overseas Sites

| Overseas sites | | |----------------|---| | **Base: All operating overseas sites** | 115 | | One | 41% | | 2-5 | 37% | | 6-10 | 11% | | 11-20 | 3% | | 21-50 | 3% | | More than 50 | 4% | | Don’t know/refused | 2% |

Over half of those firms with overseas sites have 2 or more of them, although most have less than 5. However, a small minority of firms claimed to operate in excess of 50 sites, suggesting that they are extremely large multi-nationals.

The table below shows usage of the various different modes of internationalisation (including importing) by users and non-users of UKTI’s services. It is clear from this analysis that, whilst users and non-users are equally likely to sell direct to customers overseas, the former are more inclined to also adopt alternative internationalisation approaches (particularly using agents or distributors).

Table 5.1.4 Modes Of Internationalisation – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |-------------|-------|-----------|----------| | **Base** | 902 | 235 | 667 | | Selling direct | 91% | 91% | 91% | | Agents/distributors | 42% | 60% | 35% | | Contractual arrangements | 9% | 13% | 7% | | Overseas site | 13% | 17% | 12% | | - Manufacturing/assembly | 3% | 3% | 3% | | - Call centre | 1% | 1% | 1% | | - Sales/service delivery | 11% | 15% | 10% | | - R&D | 4% | 4% | 4% | | Importing | 58% | 62% | 57% | As seen below, the larger a firm is (in terms of employee numbers) the more likely they are to use agents/distributors, do business overseas through contractual arrangements (such as licensing) and operate their own overseas sites. Whilst the difference is less pronounced, there is also some evidence that the same is true for older firms.

Table 5.1.5 Modes Of Internationalisation – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Selling direct | 88% | 91% | 91% | 92% | 90% | 90% | 92% | 84% | | Agents/distributors | 33% | 37% | 46% | 34% | 46% | 61% | 53% | 70% | | Contractual arrangements | 7% | 11% | 9% | 7% | 7% | 12% | 18% | 25% | | Overseas site | 7% | 12% | 15% | 7% | 13% | 33% | 34% | 39% | | - Manufacturing/assembly | 1% | 4% | 3% | 1% | 2% | 11% | 7% | 10% | | - Call centre | 1% | 1% | 1% | 0% | 1% | 2% | 3% | 7% | | - Sales/service delivery | 7% | 9% | 14% | 6% | 12% | 28% | 30% | 36% | | - R&D | 1% | 4% | 4% | 3% | 3% | 6% | 8% | 16% | | Importing | 50% | 57% | 61% | 50% | 69% | 79% | 69% | 53% |

The table below shows usage of the various different modes of internationalisation by overseas experience (measured via the number of years firms have been involved in overseas business activity and the number of markets they are doing business in). As might be expected, the more experienced firms are in overseas business, the more likely they are to use each mode. In particular, experienced firms are notably more inclined to use agents and distributors and to have their own overseas sites. More experienced firms are also more likely to import goods or services from overseas.

Table 5.1.6 Modes Of Internationalisation – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 185 | 433 | 270 | 411 | 214 | 268 | | Selling direct | 83% | 91% | 93% | 87% | 92% | 94% | | Agents/distributors | 30% | 40% | 48% | 27% | 46% | 58% | | Contractual arrangements | 9% | 8% | 11% | 6% | 8% | 13% | | Overseas site | 7% | 11% | 18% | 7% | 13% | 20% | | - Manufacturing/assembly | 0% | 3% | 4% | 1% | 2% | 5% | | - Call centre | 0% | 1% | 1% | 0% | 0% | 2% | | - Sales/service delivery | 6% | 9% | 16% | 7% | 11% | 17% | | - R&D | 2% | 3% | 5% | 1% | 3% | 7% | | Importing | 42% | 56% | 69% | 46% | 65% | 70% | The following table provides analysis by whether or not firms are innovative or IP active (for the definitions of ‘innovative’ firms and ‘IP active’ firms used in this analysis, see Chapter 6.7). There is little difference in the proportion of firms selling direct by these various innovation measures, but innovative and IP active firms are significantly more likely to use the other internationalisation modes (and are also more likely to import).

Table 5.1.7 Modes Of Internationalisation – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | **Base** | 398 | 680 | 222 | 224 | 655 | | Selling direct | 90% | 90% | 92% | 89% | 91% | | Agents/distributors | 47% | 47% | 26% | 56% | 35% | | Contractual arrangements | 13% | 10% | 5% | 18% | 6% | | Overseas site | 16% | 14% | 11% | 18% | 11% | | - Manufacturing/assembly | 4% | 4% | 0% | 4% | 2% | | - Call centre | 1% | 1% | 1% | 2% | 1% | | - Sales/service delivery | 13% | 12% | 10% | 15% | 10% | | - R&D | 6% | 4% | 2% | 4% | 3% | | Importing | 62% | 61% | 49% | 68% | 55% |

The table below provides analysis by firms’ growth objectives over the next 5 years, and also shows results separately for innovative, high growth firms (a key group for UKTI). It is clear from this analysis that firms planning ‘substantial’ growth are much more likely to be using ‘non-traditional’ internationalisation modes (i.e. approaches other than just selling direct).

Table 5.1.8 Modes Of Internationalisation – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------------|-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | **Base** | 108 | 510 | 248 | 204 | 476 | 222 | | Selling direct | 93% | 90% | 90% | 90% | 90% | 92% | | Agents/distributors | 27% | 42% | 47% | 50% | 45% | 26% | | Contractual arrangements | 4% | 9% | 11% | 12% | 9% | 5% | | Overseas site | 8% | 14% | 15% | 17% | 13% | 11% | | - Manufacturing/assembly | 2% | 3% | 3% | 4% | 4% | 0% | | - Call centre | 0% | 1% | 1% | 1% | 1% | 1% | | - Sales/service delivery | 8% | 12% | 13% | 14% | 11% | 10% | | - R&D | 1% | 4% | 5% | 5% | 4% | 2% | | Importing | 49% | 59% | 59% | 63% | 61% | 49% | The table below shows usage of the various different modes of internationalisation by firms’ growth, using the ASBS and OECD definitions (for full details of these definitions please refer to Chapter 6.9).

Table 5.1.9 Modes Of Internationalisation – By Growth

| | ASBS Definition | OECD Definition | |----------------------|-----------------|-----------------| | | Sustained | Contained | New | No growth | High growth | Gazelles | | **Base** | 89 | 139 | 159 | 515 | 100 | 38 | | Selling direct | 90% | 89% | 91% | 91% | 90% | 95% | | Agents/distributors | 53% | 48% | 44% | 37% | 40% | 39% | | Contractual arrangements | 9% | 12% | 12% | 7% | 11% | 5% | | Overseas site | 16% | 17% | 15% | 11% | 13% | 8% | | - Manufacturing/assembly | 4% | 4% | 3% | 2% | 2% | 0% | | - Call centre | 0% | 2% | 2% | 1% | 1% | 0% | | - Sales/service delivery | 12% | 16% | 14% | 9% | 12% | 8% | | - R&D | 5% | 2% | 5% | 4% | 6% | 0% | | Importing | 68% | 66% | 54% | 56% | 65% | 66% |

There is some evidence that firms that are defined as growing under the ASBS definition (i.e. sustained, contained or new growth) are more likely to be involved in modes of internationalisation beyond direct sales. However, there is no indication that either ‘high growth’ firms or ‘gazelles’ (as per the OECD definition) are any more likely to be engaged in these activities.

Analysis has also been provided by whether or not younger firms are ‘born global’ (i.e. have been conducting business overseas since the outset) or are defined as being ‘young, technology intensive’. For the definitions of these categorisations, please refer to Chapters 6.6.2 and 6.7.3 respectively). As seen below, there is relatively little difference in the modes used by young firms that are defined as ‘born global’ or ‘young technology intensive’ and those that are not. That said, those firms that are classified as ‘born global’ under the alternative, tighter definition are significantly more likely to have their own overseas sites.

Table 5.1.9 Modes Of Internationalisation – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Over 5 years old | | **Base** | 255 | 136 | 44 | 126 | 647 | | Selling direct | 88% | 90% | 86% | 88% | 91% | | Agents/distributors | 33% | 30% | 36% | 38% | 43% | | Contractual arrangements | 7% | 7% | 11% | 11% | 9% | | Overseas site | 7% | 9% | 20% | 10% | 14% | | - Manufacturing/assembly | 1% | 2% | 5% | 2% | 3% | | - Call centre | 1% | 1% | 0% | 2% | 1% | | - Sales/service delivery | 7% | 7% | 16% | 10% | 12% | | - R&D | 1% | 1% | 0% | 2% | 4% | | Importing | 50% | 53% | 55% | 52% | 60% | 5.2 Number of Modes Used

The chart below provides an analysis of the number of modes firms have been involved in the last five years (or are planning to do in the next year in the case of ‘considerers’). Please note that this analysis is based just on the ‘outward’ internationalisation modes and does not include importing.

Chart 5.2.1 Number Of Modes Of Internationalisation Used In Last 5 Years (Or Considering In Next Year For ‘Considerers’)

Well over half of all internationalising firms (58%) are only using one mode when doing business overseas, with only around 1 in 10 involved in 3 or 4 different modes.

It is clear from the above analysis that UKTI users are more likely to employ multiple approaches when doing business overseas, with 63% using more than one mode compared to only 35% of non-users. However, this may well be a function of their greater experience overseas and the fact they tend to be operating in more markets (please refer to Section 6 for details of the profile of users and non-users). As seen below, this picture varies considerably across modes. In particular, those involved in some form of contractual arrangement or operating their own overseas site are much more likely to be involved in 3 or 4 different modes, suggesting that firms tend to adopt these approaches later in the international development. This is consistent with the earlier analysis that showed that more experienced exporters are more inclined to use these modes.

Table 5.2.1 Number of Modes – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 815 | 361 | 79 | 113 | | One | 55% | 15% | 6% | 12% | | Two | 34% | 62% | 34% | 32% | | Three | 9% | 19% | 39% | 41% | | Four | 2% | 5% | 21% | 3% | 6. Profile

6.1 Age of Business

The chart below shows the profile of internationalising firms in terms of their age. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.1.1 When Business Established – By UKTI Usage

As detailed earlier, the overall sample frame for this study was stratified by age to ensure robust coverage of firms aged up to 5 years, firms aged 5-10 and firms more than 10 years old. The data was then weighted to the known profile of internationalising firms (based on data taken from the 2007/8 Annual Small Business Survey), and the overall profile of firms reflects this.

Overall, the age profile of UKTI users and non-users is very similar, although the former are perhaps slightly older (with only 12% established in the last 5 years compared to 19% of non-users). The table below shows this age data by firm size (measured via number of employees).

Table 6.1.1 When Business Established – By Size Of Firm

| Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |----------------------------|-----|-------|-------|---------|------| | Base | 545 | 222 | 53 | 28 | 35 | | Within the last 2 years | 6% | 2% | 2% | 0% | 0% | | 2-5 years ago | 19% | 5% | 2% | 4% | 3% | | 5-10 years ago | 28% | 22% | 12% | 12% | 2% | | 10-20 years ago | 26% | 27% | 22% | 12% | 9% | | More than 20 years ago | 21% | 45% | 61% | 73% | 86% |

As expected, this analysis shows that larger firms tend to be older than their younger counterparts. However, it should be noted that a significant proportion of the smallest internationalising firms (with less than 10 employees) have been established for some time (26% for between 10 and 20 years and 21% for over 20 years). 6.2 Size of Business (Employees)

The chart below shows the size profile of firms, measured via their number of employees. Analysis has been provided at the total level, and by UKTI users and non-users.

The majority of internationalising firms are relatively small in terms of staff numbers, with over half having less than 10 employees and most of the remainder having less than 50 employees. This reinforces the importance of considering the needs of smaller firms when formulating policy in the area of trade support.

As with age, UKTI users and non-users have a broadly similar profile when it comes to size of firm, although users are slightly more likely to have over 50 employees. The table below shows firm size analysed by age.

Table 6.2.1 Number of Employees – By Age Of Firm

| Age (Years Trading) | Up to 5 | 6-10 | Over 10 | |---------------------|---------|------|---------| | Base | 255 | 219 | 428 | | Less than 10 | 84% | 66% | 44% | | 10-49 | 11% | 26% | 32% | | 50-99 | 2% | 4% | 10% | | 100-249 | 1% | 2% | 5% | | 250 or more | 1% | 0% | 7% | | Don’t know/refused | 2% | 3% | 2% |

Once again, the correlation between age and size of firm is highlighted. However, it should be noted that approaching half of the well-established internationalising firms (i.e. those trading for over 10 years) still have less than 10 employees. 6.3 Size of Business (Turnover)

The chart below shows the size profile of firms as measured by their annual turnover. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.3.1 Annual Turnover – By UKTI Usage

Approaching two-thirds of internationalising firms have fairly modest turnovers of up to £2 million, and only around 1 in 10 report sales in excess of £10 million.

Interestingly, whilst UKTI users and non-users were closely matched in terms of employee numbers, it appears that the former are somewhat more likely to generate higher turnovers. Overall, 35% of users report a turnover in excess of £2 million compared to only 24% of non-users. The table below shows firm turnover analysed by both age and number of employees.

Table 6.3.1 Annual Turnover - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|-----|-------|-------|---------|------| | Up to 5 | 255 | 545 | 222 | 53 | 28 | 35 | | 6-10 | 219 | 222 | 53 | 28 | 35 | | | Over 10 | 428 | 53 | 28 | 35 | | | | Base | | | | | | | | Up to £500,000 | 62% | 62% | 6% | 2% | 0% | 6% | | £500,000-£2million | 23% | 23% | 44% | 1% | 0% | 3% | | £2million-£10million| 5% | 4% | 33% | 56% | 11% | 4% | | £10million-£50million| 2% | 0% | 5% | 24% | 71% | 25% | | More than £50million| 1% | 0% | 6% | 0% | 2% | 6% | | Don't know/refused | 7% | 10% | 11% | 10% | 10% | 11% |

Unsurprisingly, there is a strong relationship between size measured by turnover and size measured by number of employees. The expected relationship between turnover and age is also evident, with older firms more likely to have the larger turnovers of over £2million.

However, it is certainly not the case that all older firms have larger turnovers, with over a quarter (27%) of those established more than 10 years reporting a turnover of £500,000 or less, and a similar proportion (26%) reporting a turnover of between £500,000 and £2million. 6.4 Industry Sector

The chart below shows the profile of firms in terms of their industry sector, both at the total level and by UKTI usage. During the survey the data on sector was collected at the level of 1-digit SIC code, but for the purposes of this analysis it has been summarised into primary industries, production, construction and services.

Overall, approaching two-thirds of internationalising firms are in the services sector, with almost all the remainder operating in the production sector. However, it appears that UKTI users are slightly more likely than non-users to be production sector firms.

As seen below, there is some evidence that internationalising firms established over 10 years or with 10 or more employees are more likely to be in the production sector than is the case for younger and smaller firms.

Table 6.4.1 Industry Sector - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | **Base** | | | | | | | | | | Primary | 0% | 1% | 1% | 1% | 1% | 0% | 4% | 0% | | Production | 22% | 28% | 42% | 27% | 43% | 65% | 51% | 43% | | Construction | 2% | 1% | 1% | 1% | 2% | 0% | 0% | 3% | | Services | 75% | 69% | 57% | 71% | 55% | 35% | 45% | 54% | 6.5 Ownership

The table below provides an analysis of the ownership of firms in terms of whether they are domestically or foreign owned. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.5.1 Company Ownership – By UKTI Usage

| | UKTI User | Non-User | Total | |----------------|-----------|----------|-------| | Joint UK & foreign owned | 2% | 3% | 2% | | Foreign owned | 8% | 9% | 9% | | UK owned | 91% | 90% | 90% |

Base: All respondents (Base) UKTI Users (235), Non-Users (667), Total (902)

Whilst the vast majority of the firms interviewed are UK-owned, around 1 in 10 are in foreign ownership (either wholly or partly). There is no difference between UKTI users and non-users in this respect.

As seen below, the larger the UK firm is, the more likely they are to be under foreign ownership.

Table 6.5.1 Company Ownership - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------|---------------------|----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | UK owned | 91% | 90% | 89% | 94% | 87% | 88% | 77% | 64% | | Foreign owned | 8% | 8% | 9% | 4% | 12% | 12% | 19% | 33% | | Joint UK & foreign owned | 1% | 2% | 1% | 2% | 1% | 0% | 4% | 3% |

OMB Research Ltd Report – D5 32 6.6 Experience of Doing Business Overseas

6.6.1 Number Of Years Doing Business Overseas

The chart below shows the experience profile of firms as measured by the length of time they have been involved in overseas business activity. Analysis has been provided at the total level, and by UKTI users and non-users.

UKTI users tend to be slightly more experienced in overseas markets than non-users, with 72% and 60% respectively having been doing business overseas for more than 5 years. The table below shows the length of time firms have been involved in overseas business activity analysed by both size (measured by number of employees) and age.

Table 6.6.1.1 Number Of Years Doing Business Overseas - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Not yet exporting | 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% | | Less than 2 years | 40% | 10% | 4% | 16% | 8% | 2% | 0% | 3% | | 2-5 years | 49% | 24% | 10% | 23% | 18% | 16% | 14% | 6% | | 6-10 years | 0% | 62% | 18% | 29% | 24% | 14% | 21% | 14% | | 11-20 years | 0% | 0% | 34% | 17% | 26% | 24% | 31% | 15% | | More than 20 years | 0% | 0% | 29% | 9% | 21% | 37% | 27% | 59% | | Don't know/refused | 1% | 1% | 2% | 1% | 2% | 2% | 7% | 3% |

As expected, there is a very strong link between the age of the firm and the length of time they have been doing business overseas, suggesting that when firms do internationalise they often do so reasonably early on.

Similarly, there is a link between size and the length of time firms have been involved in overseas business activity, with smaller firms tending to have been involved in overseas business activity for a shorter period than the larger firms. 6.6.2 ‘Born Global’ Firms

Some younger firms have been classified as ‘born global’, based on whether they started doing business overseas from the outset. The details of the ‘born global’ definition, and the alternative tighter definition, are shown below.

| ‘Born Global’ Firms | |---------------------| | Firms have been defined as being ‘born global’ if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | Firms have been defined as being ‘born global’ under the alternative (tighter) definition if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | • And the proportion of turnover accounted for by overseas sales is over 25% |

The table below shows the proportions of firms classified as ‘born global’ via each of these definitions. Analysis has been provided based on all respondents and based just on younger firms.

| Table 6.6.2.1 Born Global Firms – By UKTI Usage | |-----------------------------------------------| | | All firms | Firms aged up to 5 years | | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 902 | 235 | 667 | 255 | 48 | 207 | | Born Global | 9% | 7% | 10% | 53% | 65% | 51% | | Born Global (alternative) | 3% | 2% | 3% | 17% | 19% | 17% | | Up to 5 years old but not Born Global | 8% | 4% | 9% | 45% | 35% | 48% | | Over 5 years old | 83% | 88% | 81% | - | - | - |

Overall, 9% of firms are classified as being ‘born global’ under the main definition and 3% under the tighter, alternative definition (equating to 53% and 17% respectively when based just on firms established in the last 5 years).

On the face of it, it looks as if UKTI users are less likely to be ‘born global’ than non-users (7% and 10% respectively). However, this is purely down to the slightly older profile of UKTI users, with this group containing a lower proportion of firms aged 5 years or less. When the analysis is based just on young firms, it is clear that UKTI users are in fact more likely to be ‘born global’. As seen below, amongst firms established in the last 5 years, it appears that those with 10 or more employees are slightly more likely to be ‘born global’.

Table 6.6.2.2 Born Global Firms – By Size (Up to 5 Years Old Only)

| | Firms aged up to 5 years | |--------------------------------|--------------------------| | | 0-9 emps | 10+ emps | | Base | 213 | 35 | | Born Global | 52% | 63% | | Born Global (alternative) | 17% | 17% | | Up to 5 years old but not Born Global | 46% | 37% | 6.6.3 Number Of Markets

The chart below shows the number of overseas markets firms are doing business in. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.6.3.1 Number of Markets Done Business in During Last 5 Years – By UKTI Usage

Over half of internationalising firms have done business in more than five markets over the last five years, with a third indicating that they are active in more than 10.

Users of UKTI clearly have more overseas experience in this respect, with 44% having done business in more than 10 markets compared to only 27% of non-users. As seen below, the number of markets firms do business in tends to increase with age and size.

Table 6.6.3.1 Number of Markets Done Business in During Last 5 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | None | | 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% | | One | | 11% | 11% | 7% | 11% | 7% | 0% | 3% | 0% | | 2-5 | | 37% | 35% | 27% | 35% | 30% | 20% | 14% | 3% | | 6-10 | | 20% | 28% | 24% | 23% | 28% | 28% | 31% | 8% | | More than 10 | | 20% | 21% | 40% | 25% | 33% | 48% | 52% | 83% | | Don’t know/refused | | 1% | 1% | 1% | 1% | 1% | 0% | 0% | 6% |

Firms were also asked whether they expected the number of markets they were doing business in to increase, decrease or stay the same over the next 3 years.

Chart 6.6.3.2 Whether Number of Markets Will Increase, Decrease or Stay the Same Over Next 3 Years – By UKTI Usage

Almost half of firms expect to expand into more markets over the next 3 years, with users of UKTI significantly more ambitious in this respect. Encouragingly, only 5% of firms anticipate reducing their overseas operations in the next 3 years. The table below shows the expected change in number of markets, analysed by both age and size.

Table 6.6.3.2 Whether Number of Markets Will Increase, Decrease or Stay the Same Over Next 3 Years - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|----------------------|----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Not yet exporting | 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% | | Increase | 55% | 52% | 41% | 43% | 46% | 54% | 50% | 58% | | Stay the same | 32% | 37% | 50% | 44% | 46% | 37% | 46% | 39% | | Decrease | 1% | 6% | 6% | 5% | 6% | 5% | 4% | 3% | | Don’t know/refused | 2% | 1% | 2% | 2% | 1% | 0% | 0% | 0% |

Whilst older firms tended to be operating in a greater number of markets, younger firms are more positive in terms of their plans to increase their overseas operations. However, it is a different picture by size of firm, with larger firms operating in more markets and more likely to plan to enter additional markets. 6.6.4 Regions

The chart below shows the experience profile of firms as measured by the regions in which they are currently doing business. Analysis has been provided at the total level, and by UKTI users and non-users.

Table 6.6.4.1 Regions Currently Doing Business In – By UKTI Usage

| Regions | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Europe | 87% | 87% | 87% | | North America | 44% | 52% | 41% | | South & Latin America | 21% | 27% | 18% | | Middle East & Africa | 45% | 59% | 40% | | Asia Pacific | 46% | 56% | 42% | | Not yet exporting | 4% | 3% | 4% | | Don't know | 1% | 1% | 1% |

The majority of internationalising firms are doing business in Europe, with approaching half operating in North America, the Middle East/Africa and the Asia Pacific region. However, only a fifth are active in South or Latin American markets.

Whilst there is no difference between UKTI users and non-users in terms of the proportion operating in Europe, the former are significantly more likely to be doing business in all of the other regions. UKTI users also tend to be active in more regions than non-users. As seen below, generally the older and larger a firm is the more geographic areas they tend to be operating in.

Table 6.6.4.1 Regions Currently Doing Business In - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Europe | North America | South & Latin America | Middle East & Africa | Asia Pacific | Not yet exporting | Don't know | |---------------------|-----------------------------|------|--------|---------------|-----------------------|----------------------|--------------|------------------|------------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 |

Regions

| Regions | Europe | North America | South & Latin America | Middle East & Africa | Asia Pacific | Not yet exporting | Don't know | |--------------------------|--------|---------------|-----------------------|----------------------|--------------|------------------|------------| | | 81% | 38% | 15% | 29% | 32% | 11% | 1% | | | 85% | 42% | 13% | 38% | 42% | 4% | 1% | | | 89% | 47% | 26% | 52% | 52% | 2% | 0% | | | 83% | 40% | 15% | 38% | 40% | 6% | 0% | | | 92% | 44% | 23% | 48% | 49% | 2% | 0% | | | 96% | 58% | 31% | 59% | 71% | 4% | 0% | | | 93% | 57% | 35% | 63% | 71% | 0% | 0% | | | 92% | 54% | 47% | 87% | 70% | 0% | 0% |

Number of Regions

| Number of Regions | None/not exporting | One | Two | Three | Four | Five | Don't know | |-------------------|--------------------|-----|-----|-------|------|------|------------| | | 11% | 35% | 24% | 15% | 7% | 8% | 1% | | | 4% | 34% | 23% | 21% | 10% | 7% | 1% | | | 2% | 25% | 22% | 19% | 15% | 16% | 0% | | | 6% | 33% | 23% | 20% | 8% | 9% | 1% | | | 2% | 29% | 23% | 18% | 15% | 13% | 0% | | | 4% | 10% | 22% | 18% | 22% | 24% | 0% | | | 0% | 15% | 15% | 15% | 29% | 15% | 0% | | | 0% | 15% | 15% | 15% | 40% | 15% | 0% |

OMB Research Ltd Report – D5 41 6.6.5 Proportion Of Turnover Accounted For By Overseas Sales

The chart below shows firms’ experience as measured by the proportion of their turnover that is accounted for by overseas sales. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.6.5.1 Proportion Of Turnover Accounted For By Overseas Sales – By UKTI Usage

Reflecting the fact that they tend to have been doing business overseas for longer and operate in more markets, users of UKTI also report that a significantly greater proportion of their turnover is accounted for by overseas sales than is the case for non-users. As seen below, firms that have been established for more than 10 years tend to indicate that overseas sales account for a higher proportion of their turnover than is the case amongst younger firms. However, there is no clear relationship in this respect by size of firm. It is also worth noting that a significant minority of young and small firms are extremely reliant on exports, with 16% of firms established in the last 5 years and 19% of those with less than 10 employees indicating that overseas sales account for more than half of their revenues.

Table 6.6.5.1 Proportion Of Turnover Accounted For By Overseas Sales - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Zero | 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% | | Less than 10% | 45% | 47% | 38% | 44% | 39% | 29% | 48% | 29% | | 11%-25% | 14% | 14% | 15% | 14% | 16% | 18% | 9% | 14% | | 26%-50% | 10% | 13% | 15% | 13% | 15% | 18% | 15% | 18% | | 51%-75% | 5% | 6% | 11% | 8% | 11% | 12% | 8% | 12% | | More than 75% | 11% | 8% | 11% | 11% | 9% | 10% | 15% | 9% | | Don't know/refused | 4% | 7% | 7% | 5% | 9% | 8% | 4% | 18% |

Firms were also asked whether they expected the proportion of turnover accounted for by overseas sales to increase, decrease or stay the same over the next 3 years.

Chart 6.6.5.2 Whether Proportion of Turnover Accounted for by Overseas Sales will be Higher, Lower or Same in a Year’s Time – By UKTI Usage

Base: All respondents (Base, Don’t know/refused) UKTI Users (235, 2%), Non-Users (667, 4%), Total (902, 4%) Overall, 42% of firms expect overseas sales to become more important to their business over the next year, with only 7% anticipating that they will account for a lower proportion of turnover than they do currently. This mirrors the results on whether firms expect to increase the number of market they operate in, when 46% though that this would be the case (as seen in section 6.6.3).

Once again, UKTI users appear more ambitious in their plans for overseas growth and are significantly more likely than non-users to anticipate an increase in the proportion of turnover coming from overseas.

The table below shows the expected change in export turnover, analysed by both age and size.

Table 6.6.5.2 Whether Proportion of Turnover Accounted for by Overseas Sales will be Higher, Lower or Same in a Year’s Time - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|-----|-------|-------|---------|------| | Base | | 545 | 222 | 53 | 28 | 35 | | Not yet exporting | | 255 | 219 | 428 | | | | Higher | | 45% | 49% | 39% | 40% | 41% | 48% | 55% | 60% | | About the same | | 35% | 38% | 48% | 43% | 48% | 48% | 38% | 28% | | Lower | | 5% | 7% | 7% | 7% | 8% | 0% | 0% | 6% | | Don’t know/refused | | 3% | 2% | 4% | 4% | 2% | 0% | 8% | 5% |

Whilst there is no clear picture by age of firm, it does appear that younger firms established for less than 10 years are most likely to increase the proportion or turnover accounted for by overseas sales. However, when looking at size of firm, it is those with fewer employees that are most likely to be expecting overseas growth. 6.7 Innovation

6.7.1 ‘Innovative’ Firms

Information on the engagement of employees in R&D and new product or service development activity, externally commissioned product or service development and sales of new products and services has been used to classify firms as either ‘innovative’ or ‘non-innovative’. The details of the ‘innovative’ definition, and the alternative tighter definition, are shown below.

| ‘Innovative’ Firms | |-------------------| | Firms have been defined as ‘innovative’ if they… | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product/service development | | • Or, have commissioned external new product or service development activity in the last year | | • Or, have introduced new products or services in the last 3 years except firms established in the last 2 years |

Firms have been defined as ‘innovative’ under the alternative, tighter definition if they …

| • Have more than one employee engaged in R&D activity and more than one employee engaged in new product or service development and at least some employees are involved in the development of scientific or technical knowledge not commonly available | | • Or, have commissioned external new product or service development activity in the last year | | • Or, have introduced new products or services in the last 3 years and these are ‘new to the world’ or ‘new to the sector’ |

The table below shows the proportions of firms classified as ‘innovative’ via each of these definitions. Analysis has been provided at the total level, and by UKTI usage.

| Table 6.7.1.1 Innovative Firms – By UKTI Usage | |-----------------------------------------------| | | Total | UKTI Usage | | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Innovative | 76% | 85% | 72% | | Innovative (alternative) | 44% | 53% | 41% |

Around three-quarters of internationalising firms are classified as being innovative by the main definition, although this drops to 44% when the tighter, alternative definition is employed. UKTI users are significantly more likely to be innovative than non-users, irrespective of which definition is used. The table below shows the proportion of firms classified as being innovative, analysed by both age and size.

Table 6.7.1.2 Innovative Firms - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Innovative | Innovative (alternative) | |---------------------|-----------------------------|------|------------|--------------------------| | | | 255 | 74% | 41% | | | | 219 | 77% | 48% | | | | 428 | 76% | 44% | | | | 545 | 72% | 41% | | | | 222 | 79% | 49% | | | | 53 | 79% | 51% | | | | 28 | 85% | 40% | | | | 35 | 91% | 56% |

It is clear that the larger a firm is (in terms of employee numbers), the more likely it is to be innovative. However, there appears to be no relationship between age and innovation. 6.7.2 IP Active Firms

Firms were asked to indicate whether or not they hold any patents or trademarks, either in the UK or overseas, for any of their products or services. This data has then been used to create a measure of ‘IP active’ firms, as detailed below.

| ‘IP Active’ Firms | |-------------------| | Firms have been defined as ‘IP Active’ if they… | | • Have applied for or obtained any patents, trademarks or other legal protection for their products or services, either in the UK or overseas |

If they held any IP protection, firms were also asked whether this related to the UK or overseas countries. The table below shows the proportions of firms classified as ‘IP active’, as well as details of the area to which the IP protection related to.

Table 6.7.2.1 Whether Applied For or Obtained Any Patents, Trademarks or Other Legal Protection for Products or Services – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |------------|-------|-----------|----------| | Base | 902 | 235 | 667 | | Yes (IP active) | 25% | 37% | 21% | | - UK | 7% | 9% | 7% | | - Overseas | 1% | 2% | 1% | | - Both | 16% | 26% | 12% | | No | 72% | 60% | 76% | | Don’t know | 3% | 3% | 3% |

A quarter of internationalising firms have applied for or obtained some form of legal protection for any of their products or services, and are therefore defined as being IP active. In most cases these firms hold IP protection for both the UK and overseas markets. UKTI users are notably more likely to hold IP than non-users. As seen below, there appears to be a clear relationship between size of firm and likelihood of being IP active. However, there are no statistically significant differences by age of firm in this respect.

Table 6.7.2.2 Whether Applied For or Obtained Any Patents, Trademarks or Other Legal Protection for Products or Services - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|-----|-------|-------|---------|------| | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Yes (IP active) | 23% | 23% | 27% | 20% | 25% | 45% | 38% | 50% | | - UK | 9% | 8% | 7% | 6% | 7% | 9% | 4% | 18% | | - Overseas | 2% | 2% | 1% | 1% | 1% | 3% | 0% | 3% | | - Both | 11% | 13% | 18% | 13% | 15% | 33% | 30% | 27% | | No | 77% | 74% | 69% | 79% | 71% | 50% | 56% | 35% | | Don't know | 0% | 3% | 4% | 1% | 4% | 4% | 7% | 14% |

It is also the case that firms involved in contractual arrangements overseas (such as licensing, franchising or joint ventures) are most likely to hold IP protection.

Table 6.7.2.3 Whether Applied For or Obtained Any Patents, Trademarks or Other Legal Protection for Products or Services – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 815 | 361 | 79 | 113 | | Yes (IP active) | 25% | 34% | 51% | 36% | | - UK | 7% | 7% | 7% | 6% | | - Overseas | 1% | 1% | 4% | 1% | | - Both | 16% | 25% | 40% | 27% | | No | 72% | 61% | 49% | 59% | | Don't know | 3% | 4% | 0% | 6% | 6.7.3 Young, Technology Intensive Firms

Some firms have been classified as ‘young, technology intensive’, and the details of this definition are shown below.

| ‘Young, Technology Intensive’ Firms | |-------------------------------------| | Firms have been defined as being ‘young, technology intensive’ if they… | | • Have been established for 5 years or less | | • And are classified as being innovative using the alternative (tighter) definition or are classified as IP active |

The table below shows the proportions of firms classified as ‘young, technology intensive’. Analysis has been provided based on all respondents and based just on younger firms.

Table 6.7.3.1 Young, Technology Intensive Firms – By UKTI Usage

| | All firms | Firms aged up to 5 years | |----------------------|-----------|--------------------------| | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 902 | 235 | 667 | 255 | 48 | 207 | | Young tech intensive | 8% | 8% | 8% | 49% | 69% | 45% | | Up to 5 years old but not young tech intensive | 9% | 4% | 11% | 51% | 31% | 55% | | Over 5 years old | 83% | 89% | 81% | - | - | - |

Overall, 8% of all internationalising firms are classified as being ‘young, technology intensive’, which equates to 49% of those established in the last 5 years.

Looking at the analysis based on all firms, it appears as if UKTI users and non-users are equally likely to be ‘young, technology intensive’. However, this is a function of the slightly older age profile of UKTI users, and when the analysis is based just on firms aged 5 years or less then it becomes apparent than UKTI users are significantly more likely to be ‘young, technology intensive’ firms.

As seen below, amongst firms established in the last 5 years, it is the larger ones with 10 or more employees that are most likely to be defined as being ‘young, technology intensive’.

Table 6.7.3.2 Young, Technology Intensive Firms – By Size (Up to 5 Years Old Only)

| | Firms aged up to 5 years | |----------------------|--------------------------| | | 0-9 emps | 10+ emps | | Base | 213 | 35 | | Young tech intensive | 48% | 66% | | Up to 5 years old but not young tech intensive | 52% | 34% | 6.8 Growth

6.8.1 Past Growth

Firms that have been in existence for at least three years were asked whether, compared to this time three years ago, the number of people they employed now was higher, lower or about the same. The chart below shows firms’ past growth profile, as determined by growth in employee numbers.

Chart 6.8.1.1 Whether Employee Numbers are Higher, Lower or Same as 3 Years Ago – By UKTI Usage

Only a quarter of internationalising firms indicate that their employee numbers are higher than they were 3 years ago, and this is off-set by a similar proportion that indicate staffing levels have reduced over this time. There is no real difference between UKTI users and non-users in this respect. To provide another perspective on past growth, firms were also asked whether, compared to this time three years ago, their turnover was higher, lower or about the same. The chart below shows firms' past growth profile, as determined by growth in turnover.

Chart 6.8.1.2 Whether Turnover is Higher, Lower or Same as 3 Years Ago – By UKTI Usage

The picture in terms of turnover growth over the last 3 years is more positive than that based on employee numbers, with 40% of internationalising firms indicating that turnover has increased compared to 29% reporting a decline.

UKTI users appear to have performed slightly better than non-users, with 43% of the former reporting an increase in turnover compared to 38% of the latter. However, it should be noted that this difference is not statistically significant. The table below provides further analysis of the levels of both employee and turnover growth in the last 3 years.

Table 6.8.1.1 Employee & Turnover Growth in Last 3 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|------|------|---------|-----|-------|-------|---------|------| | Up to 5 | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Higher | | 19% | 37% | 24% | 19% | 33% | 40% | 30% | 38% | | Same | | 21% | 43% | 46% | 47% | 36% | 27% | 25% | 25% | | Lower | | 10% | 21% | 31% | 22% | 27% | 28% | 38% | 33% | | Est. in last 3 years| | 50% | 0% | 0% | 12% | 3% | 2% | 4% | 1% | | Don't know | | 0% | 0% | 0% | 0% | 0% | 2% | 0% | 0% |

| Turnover Growth | | | | | | | | | | |---------------------|-----------------------------|------|------|---------|-----|-------|-------|---------|------| | Higher | | 32% | 49% | 39% | 36% | 46% | 42% | 48% | 48% | | Same | | 6% | 21% | 24% | 21% | 19% | 28% | 18% | 16% | | Lower | | 11% | 28% | 34% | 29% | 28% | 23% | 23% | 30% | | Est. in last 3 years| | 51% | 0% | 0% | 12% | 3% | 2% | 4% | 1% | | Don't know | | 0% | 2% | 4% | 2% | 4% | 4% | 7% | 6% |

Whilst there is no clear picture by age or size in terms of the proportion of firms that have grown over the last 3 years (in either employee or turnover terms), it does seem that older firms and larger firms are more likely to have reduced their employee numbers. Older firms are also more likely to report a decline in turnover over this period. 6.8.2 Future Growth

All firms were asked their opinions on their future growth, assessing their business as a whole. The chart below shows firms’ growth objectives for the next five years.

Chart 6.8.2.1 Growth Objectives For Business Over Next 5 Years – By UKTI Usage

Whilst the majority of firms indicated that they expect to grow, there were more likely to feel that this growth would be ‘moderate’ rather than ‘substantial’. However, UKTI users were significantly more likely to be planning ‘substantial’ growth than non-users. The table below shows firms’ expectations in respect of future growth analysed by both age and size.

Table 6.8.2.1 Growth Objectives For Business Over Next 5 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 6-10 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|------|------|-------|-------|---------|------| | Up to 5 | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | 6-10 | | 27% | 21% | 22% | 31% | 22% | 35% | 35% | | Over 10 | | 59% | 54% | 62% | 58% | 53% | | | | 0-9 | | 7% | 10% | 16% | 15% | 8% | 8% | 9% | | 10-49 | | 1% | 4% | 1% | 2% | 2% | 1% | 0% | 0% | | 50-99 | | 2% | 1% | 3% | 2% | 2% | 6% | 0% | 3% | | 100-249 | | 2% | 1% | 3% | 2% | 2% | 6% | 0% | 3% | | 250+ | | 2% | 1% | 3% | 2% | 2% | 6% | 0% | 3% |

It is clear from the above analysis that younger firms that have been established no more than 5 years have the most ambitious growth objectives, with 40% planning 'substantial' growth. However, there is no clear picture in this respect by size of firm. 6.8.3 Innovative High Growth Firms

The survey data on innovation activity and growth objectives has been combined in the analysis to identify ‘innovative high growth firms’, as this is a key group for UKTI to target.

The table below provides analysis of the combined innovative and growth data, analysed at the total level and by UKTI usage.

Table 6.8.3.1 Innovation & Growth Objectives – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Innovative & expect substantial growth | 21% | 29% | 18% | | Innovative & expect moderate growth | 43% | 46% | 41% | | Innovative & expect no growth or negative growth | 12% | 10% | 12% | | Non-innovative | 24% | 15% | 28% |

Overall 21% of internationalising firms are defined as being ‘innovative high growth’, and it is encouraging that 29% of UKTI users fall into this category. However, it should be noted that 18% of those firms that do not use UKTI are still in this critical category, confirming that there are many ‘innovative high growth’ internationalising firms that UKTI are not yet reaching. 6.8.4 Growth (ASBS & OECD Definitions)

Further analysis of growth has been carried out, seeking to replicate, as far as is possible with the data available, an analysis of growth conducted for the Annual Small Business Survey (ASBS). For this analysis firms have been divided into four ‘growth categories’, taking account of both past and future growth. Furthermore, additional analysis has also been conducted seeking to replicate the OECD categories of growth (‘high growth’ firms and ‘gazelles’). Details of both these approaches are set out below.

| Growth – ASBS Definition | |--------------------------| | Firms have been classified as displaying ‘sustained growth’ if… | | • Their employee numbers have grown over the last 3 years | | • And, they are anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘contained growth’ if… | | • Their employee numbers have grown over the last 3 years | | • But, they are not anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘new growth’ if… | | • Their employee numbers have not grown over the last 3 years including firms established in the last 3 years | | • But, they are anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘no growth’ if… | | • Their employee numbers have not grown over the last 3 years including firms established in the last 3 years | | • And, they are not anticipating substantial growth over the next 5 years |

| Growth – OECD Definition | |--------------------------| | Firms have been defined as ‘high-growth’ if… | | • Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years | | • And, they are less than 5 years old | | Firms have been defined as ‘gazelles’ if… | | • Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years | | • And, they are less than 5 years old | The table below provides analysis of growth under both the ASBS and OECD definitions.

Table 6.8.4.1 Growth (ASBS & OECD Definitions) – By UKTI Usage

| | Total | UKTI Usage | | | | | | | |------------------|-------|------------|----------|----------|----------|----------|----------|----------| | | | UKTI User | Non-User | | | | | | | Base | 902 | 235 | 667 | | | | | | | ASBS Growth | | | | | | | | | | Sustained growth | 10% | 11% | 9% | | | | | | | Contained growth | 16% | 17% | 15% | | | | | | | New growth | 15% | 20% | 13% | | | | | | | No growth | 59% | 52% | 62% | | | | | | | OECD Growth | | | | | | | | | | High growth | 10% | 9% | 10% | | | | | | | Gazelles | 3% | 1% | 3% | | | | | |

By the ASBS definition, 41% of internationalising firms are displaying growth, with most of these displaying ‘contained’ or ‘new’ growth. UKTI users are more likely to be growing, and this difference is most pronounced when it comes to ‘new growth’ (20% vs. only 13% of non-users).

Based on the OECD categories, 10% of internationalising firms are classed as ‘high growth’ and just 3% as ‘gazelles’. There are no statistically significant differences between users and non-users in this respect.

The table below provides further analysis by age and size.

Table 6.8.4.2 Growth (ASBS & OECD Definitions) - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | | | | | | | |------------------|---------------------|---------------------------|----------|----------|----------|----------|----------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | ASBS Growth | | | | | | | | | | Sustained growth | 8% | 16% | 8% | 6% | 14% | 13% | 21% | 21% | | Contained growth | 11% | 20% | 15% | 13% | 20% | 27% | 12% | 21% | | New growth | 32% | 11% | 13% | 16% | 17% | 10% | 12% | 14% | | No growth | 50% | 74% | 64% | 65% | 49% | 48% | 55% | 45% | | OECD Growth | | | | | | | | | | High growth | 15% | 16% | 23% | 10% | 11% | 8% | 9% | 7% | | Gazelles | 15% | 0% | 0% | 3% | 2% | 0% | 0% | 0% |

Using the ASBS growth categories, there does not appear to be any consistent pattern by either age or size of firm, although it does seem that firms with less than 10 employees are more likely to be exhibiting ‘no growth’ than larger firms. There is also no clear pattern by the OECD categories (beyond that expected for ‘gazelles’ given the restriction of this category to firms less than 5 years old). 6.9 Business Planning

Firms were asked to indicate whether or not they have a current, written business plan, with the following results.

UKTI users appear to be more strategic in their approach than non-users, with 68% having a current written business plan compared to only 53% of non-users.

As seen below, younger firms are slightly more likely to have a business plan than those that have been established for more than 5 years. However, when looking at this by size of firm, it is very clear that the larger the firm the more likely they are to have a plan.

Table 6.9.1 Whether Have a Current, Written Business Plan - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | | |---------------------|-----------------------------|---| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Yes | 63% | 56% | 56% | 49% | 64% | 64% | 86% | 82% | | No | 35% | 42% | 37% | 48% | 26% | 26% | 8% | 9% | | Don't know | 2% | 2% | 8% | 2% | 10% | 10% | 7% | 9% | 6.10 Customer Types

Firms were asked to indicate whether their overseas customers were businesses or individuals (i.e. consumers), with the following results.

Table 6.10.1 Customer Types – By UKTI Usage

| | Total | UKTI Usage | |------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Businesses | 55% | 62% | 53% | | Individuals | 9% | 2% | 12% | | Both | 31% | 33% | 30% | | Other | 1% | 1% | 1% | | Not yet exporting| 4% | 3% | 4% |

The majority of internationalising firms (86%) sell to overseas businesses, either exclusively or as well as selling to individuals. Interestingly, it seems that UKTI users are more likely to sell to businesses (95% vs. 83% of non-users), whereas non-users are comparatively more likely to be selling to individuals (42% vs. 35% of users).

As seen below, it is also the case that the older and larger the firm is, the more likely they are to sell to overseas businesses.

Table 6.10.2 Customer Types – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Businesses | 41% | 53% | 60% | 51% | 65% | 59% | 64% | 53% | | Individuals | 18% | 11% | 6% | 13% | 5% | 1% | 0% | 0% | | Both | 29% | 31% | 32% | 29% | 27% | 36% | 36% | 47% | | Other | 2% | 1% | 1% | 1% | 1% | 0% | 0% | 0% | | Not yet exporting| 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% |

Overall, there is little difference in the customer profile by the mode of internationalisation used.

Table 6.10.3 Customer Types – By Modes Used

| | Modes Used | |------------------|------------| | | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | | Base | 815 | 361 | 79 | 113 | | Businesses | 55% | 58% | 53% | 56% | | Individuals | 9% | 3% | 6% | 4% | | Both | 32% | 34% | 30% | 33% | | Other | 1% | 0% | 3% | 1% | | Not yet exporting| 3% | 4% | 8% | 5% | Those firms that sold to overseas businesses were asked whether these business customers were the ‘end users’ of their products or services or whether they were part of the supply chain (i.e. they sold the products on to others, in either the same or modified form). This data has been combined with the other data on customer types to provide details of the proportion of internationalising firms selling direct to end users and selling into supply chains.

Table 6.10.4 Customer Types Summary – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | End users | 65% | 65% | 65% | | Supply chain | 64% | 71% | 61% | | Don’t know | 0% | 1% | 0% | | Not yet exporting | 4% | 3% | 4% |

Overall, two-thirds of internationalising firms sell directly to end users and a similar proportion sell into overseas supply chains (as around a third of firms do both). UKTI users are slightly more likely to be selling into supply chains.

Smaller firms with less than 10 employees and those that have been established for 10 years or less are less likely to be selling into overseas supply chains.

Table 6.10.5 Customer Types – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | End users | 59% | 64% | 68% | 68% | 62% | 64% | 55% | 68% | | Supply chain | 56% | 58% | 68% | 55% | 74% | 71% | 82% | 82% | | Don’t know | 0% | 1% | 0% | 1% | 0% | 0% | 0% | 0% | | Not yet exporting | 11% | 4% | 2% | 6% | 2% | 4% | 0% | 0% |

There is some evidence that firms using agents/distributors and those operating their own overseas sites are more likely to be selling their products into supply chains.

Table 6.10.6 Customer Types – By Modes Used

| | Modes Used | |----------------------|------------| | | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | | Base | 815 | 361 | 79 | 113 | | End users | 68% | 60% | 57% | 60% | | Supply chain | 63% | 75% | 66% | 73% | | Don’t know | 0% | 0% | 0% | 0% | | Not yet exporting | 3% | 4% | 8% | 5% | 6.11 Profile of UKTI Users: Internationalisation Survey vs. PIMS

The Internationalisation Survey involves interviewing a random sample of UK firms that are involved in (or seriously considering) overseas business, and as such it includes both users and non-users of UKTI’s services. UKTI also have a wealth of information on users from the on-going Performance & Impact Monitoring Survey, which involves contacting c.1,000 supported firms every quarter. The table below provides a comparison of key profile variables between UKTI users from the two surveys.

Table 6.11.1 Profile of UKTI Users – Internationalisation Survey vs. PIMS

| UKTI Users | Internationalisation Survey 2010 | PIMS 16-19 | |------------|---------------------------------|------------| | Base | 235 | 4158 | | Age | | | | 0-5 years | 12% | 27% | | 6-10 years | 24% | 18% | | Over 10 years | 65% | 55% | | Size (employees) | | | | 0-9 employees | 52% | 40% | | 10-249 employees | 40% | 45% | | 250+ employees | 7% | 11% | | Sector | | | | Primary | 0% | 0% | | Production | 39% | 39% | | Construction | 2% | 2% | | Services | 58% | 59% | | Innovation | | | | Innovative | 85% | 83% | | Innovative (alternative) | 53% | 62% | | IP active | 37% | 39% | | Overseas experience | | | | Less than 2 years | 11% | 28% | | 2-10 years | 46% | 32% | | Over 10 years | 42% | 39% | | Growth objectives (next 5 years) | | | | Grow substantially | 31% | 38% | | Grow moderately | 55% | 49% | | Same/smaller | 11% | 7% | | Business plan | | | | Yes | 68% | 75% | | No | 27% | 21% |

In terms of their physical profile, firms interviewed in the PIMS research tend to be younger than those interviewed in the Internationalisation Survey, but are also slightly larger in terms of employee numbers. However, the sectoral profile is identical for both groups of UKTI users.

PIMS users are also more likely to be relatively new to exporting, have more ambitious growth objectives and have a current business plan. This may be due to the PIMS research covering firms that have very recently received support from UKTI, whereas the Internationalisation Survey includes firms that have ever used UKTI. As such, many PIMS users are actively seeking to grow at the time of the interview, whereas Internationalisation Survey users may have passed that stage some years ago and now be less dynamic in their approach. 7. Awareness & Usage

7.1 Awareness & Use of UKTI

All firms were asked whether, prior to the interview, they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas. If so, they were also asked whether they had used either of these. The table below provides details of awareness and usage levels, along with comparative results from the 2008 survey.

Table 7.1.1 Awareness & Use of UKTI – By UKTI Usage

| | Total | UKTI Usage | Total 2008 survey | |----------------------|-------|------------|-------------------| | | | UKTI User | Non-User | | | Base | 902 | 235 | 667 | 900 | | Aware (at least one)| 68% | 100% | 55% | 68% | | - UK Trade & Investment or UKTI | 51% | 84% | 39% | 51% | | - Commercial services provided by embassies and consulates overseas | 53% | 85% | 40% | 55% | | Used (at least one) | 27% | 100% | 0% | N/A |

Overall, around two-thirds (68%) of internationalising firms had heard of either UKTI or the services provided by overseas posts. Awareness of the UKTI name stands at only 51%, with a similar awareness level (53%) recorded for the services provided by overseas posts, indicating that a significant number of firms who knew of the posts’ services were still unaware of UKTI itself. Awareness levels appear to have remained constant over the last 2 years, with no significant differences from the levels recorded in 2008.

Just over a quarter of firms (27%) claim to have used UKTI. It should be noted that this figure may under-represent UKTI usage as the respondent interviewed may not be aware that this is the case (e.g. if the firm used UKTI before the respondent joined the firm, or if a different site/department has used UKTI). However, it is also possible that UKTI users are over-represented in the sample due to response bias (i.e. those who know UKTI are more likely to agree to participate in a UKTI survey).

It is interesting to note that only 84% of UKTI users have actually heard of ‘UK Trade & Investment’ (i.e. 16% have used the services provided by overseas posts but not realised the link to UKTI). Overall awareness amongst non-users stands at 55%, indicating that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation.

______________________________________________________________________

6 Please note that the questioning approach differed in the 2008 survey, but the awareness data has been recalculated to ensure that it is directly comparable. However, it is not possible to provide valid comparison data for use of UKTI. As seen below, awareness and use of UKTI is generally higher amongst older firms and those with more employees.

Table 7.1.2 Awareness & Use of UKTI – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | |---------------------|-----------------------------|------|-----|-----|-----|-----|-----|----|----|----| | Up to 5 | 6-10 | | | | | | | | | | | Over 10 | 0-9 | | | | | | | | | | | 10-49 | 50-99 | | | | | | | | | | | 100-249 | 250+ | | | | | | | | | | | Aware | 58% | 67% | 71% | 64% | 68% | 85% | 70% | 74%| | - UKTI | 44% | 53% | 53% | 48% | 55% | 68% | 40% | 60%| | - Posts | 41% | 48% | 58% | 47% | 55% | 73% | 55% | 66%| | Used | 19% | 28% | 29% | 26% | 27% | 39% | 23% | 42%|

As might be expected, the longer a firm has been doing business overseas and the more markets they operate in, the more likely they are to have heard of UKTI and to have used their services. That said, over a quarter of firms that have been doing business overseas for more than 10 years are still not aware of UKTI.

Table 7.1.3 Awareness & Use of UKTI – By Experience

| Years Exporting | Number of Markets | Base | 185 | 433 | 270 | 411 | 214 | 268 | |-----------------|-------------------|------|-----|-----|-----|-----|-----|-----| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Aware | 55% | 68% | 72% | 60% | 71% | 75% | | - UKTI | 44% | 52% | 54% | 47% | 51% | 57% | | - Posts | 37% | 52% | 61% | 44% | 57% | 62% | | Used | 19% | 28% | 30% | 20% | 27% | 38% |

It is also the case that awareness and usage of UKTI increases amongst firms that are active in two or more overseas regions (e.g. Europe and Asia Pacific).

Table 7.1.4 Awareness & Use of UKTI – By Number of Regions

| Number of Overseas Regions Active In | Base | Aware | - UKTI | - Posts | Used | |-------------------------------------|------|-------|--------|---------|------| | None | 44 | 63% | 48% | 46% | 20% | | One | 270 | 52% | 41% | 36% | 15% | | Two | 207 | 71% | 53% | 57% | 30% | | Three | 165 | 79% | 63% | 65% | 32% | | Four | 104 | 76% | 54% | 60% | 39% | | Five | 104 | 73% | 53% | 60% | 35% | There is also clear evidence that innovative and IP active firms are more engaged with UKTI, with both awareness and usage levels higher amongst these groups.

Table 7.1.5 Awareness & Use of UKTI – By Innovation

| | Innovative | IP Active | |----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | **Base** | 398 | 680 | 222 | 224 | 655 | | **Aware** | 73% | 71% | 57% | 82% | 62% | | - **UKTI** | 60% | 55% | 39% | 64% | 47% | | - **Posts** | 59% | 56% | 43% | 70% | 46% | | **Used** | 32% | 31% | 17% | 40% | 23% |

As seen below, awareness and usage increases slightly amongst firms that plan to grow substantially over the next 5 years. It is particularly high amongst innovative high-growth firms (76% and 37% respectively), which is encouraging given that this is a key group for UKTI. However, a significant minority of this group (24%) are still not aware of UKTI.

Table 7.1.6 Awareness & Use of UKTI – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | Non innovative | |----------------|-------------------|---------------------|----------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | **Base** | 108 | 510 | 248 | 204 | 476 | 222 | | **Aware** | 68% | 65% | 73% | 76% | 69% | 57% | | - **UKTI** | 43% | 49% | 61% | 64% | 52% | 39% | | - **Posts** | 48% | 51% | 57% | 60% | 54% | 43% | | **Used** | 21% | 26% | 33% | 37% | 28% | 17% |

Awareness and usage of UKTI also increases amongst firms using less ‘traditional’ internationalisation modes (i.e. not just selling direct). In particular, around 40% of firms using agents/distributors or contractual arrangements such as licensing or franchising have used UKTI.

Table 7.1.7 Awareness & Use of UKTI – By Modes Used

| | Modes Used | |----------------|------------| | | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | | **Base** | 815 | 361 | 79 | 113 | | **Aware** | 68% | 78% | 86% | 81% | | - **UKTI** | 52% | 62% | 66% | 62% | | - **Posts** | 53% | 63% | 70% | 73% | | **Used** | 27% | 39% | 41% | 34% | 7.2 Awareness & Use of Business Link

All firms were also asked whether they had heard of Business Link and whether they had used them. Those that had not used Business Link were also asked whether they expected to do so in the future. The table below provides details of awareness and usage levels.

Table 7.2.1 Awareness & Use of Business Link – By UKTI Usage

| | Total | UKTI Usage | |------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Aware of Business Link | 81% | 87% | 79% | | Used Business Link | 54% | 67% | 49% | | Not used but expect to | 7% | 6% | 7% |

Awareness of Business Link amongst internationalising firms stands at 81%, with a little over half having used the service (54%). However, only 7% of firms indicate that they have not used Business Link but expect to do so in the future. Awareness and usage levels are significantly higher amongst UKTI users, suggesting that those firms who are open to external support are likely to access this from a number of different sources.

As seen below, there is no real difference in awareness and usage of Business Link by age of firms, but larger firms with 100 or more employees are significantly less likely to have heard of or used the service.

Table 7.2.2 Awareness & Use of Business Link – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |------------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Aware of Business Link | 78% | 81% | 82% | 82% | 86% | 83% | 60% | 63% | | Used Business Link | 56% | 54% | 53% | 56% | 58% | 50% | 18% | 39% | | Not used but expect to | 7% | 8% | 6% | 7% | 4% | 10% | 15% | 0% | 8. Drivers of Market

8.1 Drivers of Market (Summary)

For the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’

For full details of the markets selected by users and non-users of UKTI, please refer to Annex A.

Once the market had been selected, firms were read out 2 possible reasons for deciding to focus on that market, and asked to indicate the extent to which each one applied to them (using a 5 point scale, where 5 meant it was ‘completely applicable’ and 1 meant it was ‘not at all applicable’). The possible reasons tested were as follows:

- “You had received an approach from someone in <MARKET>”
- “There was someone within your company who already had experience of doing business in <MARKET>”

The table below shows the proportion of firms giving a score of 4 or 5 out of 5 for each of these reasons for doing business in the market in question. Details of the full distribution of scores are shown in Section 8.2.

| Table 8.1.1 Drivers of Market – By UKTI Usage | |-----------------------------------------------| | UKTI Usage | Total | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Received approach | 63% | 59% | 65% | | Staff with experience | 28% | 35% | 26% |

Almost two-thirds of firms indicated that a significant motive for targeting the selected market was that they were approached by someone in that market, and over a quarter were significantly motivated by the fact that they already had staff with experience of the market.

This analysis clearly demonstrates that in many cases firms’ market choice is driven by reactive or circumstantial reasons (i.e. ‘networks & serendipity’), rather than (or at least in conjunction with) more strategic reasons. This finding is consistent with the findings from other UKTI surveys such as PIMS. In terms of differences in drivers between UKTI users and non-users, it seems that the former are more likely to target a particular market because they already have some level of in-house expertise about it, but slightly less likely to be reacting to approaches from potential customers overseas.

As seen below, there is also some evidence that larger firms are more likely to choose to enter a market because they already have staff with experience of it.

Table 8.1.2 Drivers of Market – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Received approach | Staff with experience | |---------------------|-----------------------------|------|-------------------|----------------------| | Up to 5 | 6-10 | 255 | 61% | 33% | | | Over 10 | 428 | 59% | 27% | | | 0-9 | 545 | 65% | 28% | | | 10-49 | 222 | 66% | 25% | | | 50-99 | 53 | 62% | 29% | | | 100-249 | 28 | 63% | 31% | | | 250+ | 35 | 60% | 39% |

There are no consistent differences in this respect by the number of years firms have been exporting or the number of markets they operate in, and it is clear that ‘networks and serendipity’ play an important role in the market choice of all firms, irrespective of their overseas experience.

Table 8.1.3 Drivers of Market – By Experience

| Years Exporting | Number of Markets | Base | Received approach | Staff with experience | |-----------------|-------------------|------|-------------------|----------------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | 185 | 433 | 270 | 411 | 214 | 268 | | 59% | 63% | 66% | 65% | 62% | 62% | | 31% | 27% | 29% | 28% | 24% | 33% |

Innovative and IP active firms appear slightly more likely to target a market on the basis of existing in-house expertise, although the difference is not particularly pronounced.

Table 8.1.4 Drivers of Market – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Received approach | 66% | 63% | 62% | 61% | 64% | | Staff with experience | 32% | 29% | 26% | 31% | 27% | Firms that were ‘born global’ and ‘young, technology intensive’ firms are also slightly more likely to choose to enter a market because they already have staff with experience of it (particularly those defined as ‘born global’ under the alternative, tighter definition).

Table 8.1.5 Drivers of Market – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base | 255 | 136 | 44 | 126 | 647 | | Received approach | 61% | 64% | 59% | 63% | 64% | | Staff with experience| 33% | 38% | 48% | 37% | 27% |

As seen below, firms targeting high growth markets were less likely to agree that each of these possible reasons had been a significant driver. This implies that when firms enter high growth markets this is less likely to be influenced by ‘networks & serendipity’ and instead is comparatively more likely to be a result of a strategic or planned approach to market choice.

Table 8.1.6 Drivers of Market – By Market Type

| | Market | |----------------------|-----------------| | | High Growth | EEA | Other | | Base | 193 | 305 | 404 | | Received approach | 58% | 61% | 67% | | Staff with experience| 26% | 29% | 29% | 8.2 Drivers of Market (Detailed)

8.2.1 Received An Approach

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms felt that they were motivated to enter the market because they received an approach by someone in the market.

Chart 8.2.1.1 You Had Received An Approach From Someone In <Market>

Over half of firms indicated that this was ‘completely applicable’ to them, scoring 5 on the 5-point scale, and 76% felt that it applied to at least some extent (i.e. 2-5 out of 5). 8.2.2 Staff With Experience

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms felt that they were motivated to enter the market because they already had staff with experience of the market.

Chart 8.2.2.1 There Was Someone Within Your Company Who Already Had Experience Of <Market>

Overall, 40% of firms felt that this reason applied to at least some extent (i.e. 2-5 out of 5), with 21% indicating that it was a ‘completely applicable’ reason for choosing to target the selected market (i.e. 5 out of 5). 9. Barriers to Overseas Trade

9.1 Barriers (Summary)

As mentioned previously, for the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’

For full details of the markets selected by users and non-users of UKTI, please refer to Annex A.

Firms were then read out 11 potential barriers that they might have faced when trying to develop their business in the selected market, and asked to indicate the extent to which each one had been a difficulty (using a 5 point scale, where 5 meant it had been ‘extremely difficult’ and 1 meant it had ‘not been at all difficult’). The barriers tested were as follows:

- Dealing with legal or tax regulations or standards in < MARKET >
- Protecting your intellectual property
- Ensuring you get paid and enforcing contracts
- Dealing with customs procedures or paperwork
- Identifying who to make contact with in the first instance or finding a suitable partner
- Establishing an initial dialogue with prospective customers or business partners in < MARKET >
- Building relationships with key influencers or decision-makers
- Obtaining basic information about doing business in < MARKET >
- Finding the necessary management time to devote to doing business in < MARKET >
- Negotiating the culture and language
- A preference on the part of customers in < MARKET > for doing business with firms from < MARKET >

Please note that all analysis in this section of the report is based just on firms that were already doing business overseas (i.e. ‘considerers’ have been excluded). The table below shows the proportion of firms experiencing each barrier to a significant extent (i.e. scoring 4 or 5 out of 5 for the extent to which it was a difficulty). Details of the full distribution of scores are shown in Section 9.2.

Table 9.1.1 Individual Barriers – By UKTI Usage

| Base: All exporters | Total | UKTI Usage | |---------------------|-------|------------| | | | UKTI User | Non-User | | Dealing with customs procedures and paperwork | 27% | 34% | 24% | | Dealing with legal or tax regulations and standards | 23% | 31% | 20% | | Ensuring you get paid and enforcing contracts | 23% | 28% | 21% | | Finding the necessary management time to devote to doing business in <market> | 20% | 25% | 18% | | Negotiating the language and culture | 19% | 23% | 18% | | Identifying who to make contact with in the first instance | 17% | 23% | 14% | | Preference on part of customers for doing business with firms from <market> | 17% | 20% | 17% | | Building relationships with key influencers or decision makers | 16% | 21% | 14% | | Obtaining basic information about doing business in <market> | 16% | 21% | 14% | | Protecting your intellectual property | 14% | 21% | 11% | | Establishing an initial dialogue with prospective customers or partners in <market> | 14% | 17% | 13% |

The most widely experienced barriers all relate to the formalities and bureaucracy of doing business overseas, with 27% having significant problems with customs procedures, 23% with legal or tax regulations and 23% with getting paid.

UKTI users are consistently more likely to report each of the barriers than non-users, and it may have been the experience of encountering these difficulties that prompted them to contact UKTI.

However, at this stage it should be remembered that respondents were asked to talk about the ‘most challenging’ market that they had done business in, and this is likely to be contributing towards this difference between users and non-users. UKTI users tend to have been doing business overseas longer, be operating in more markets and are more likely to be doing business in high growth markets. As such, UKTI users would appear to have a higher chance of having encountered a particularly ‘challenging’ market which involves significant barriers. The 11 individual barriers firms were prompted with have been summarised further as outlined below.

| Barriers - Summary | |--------------------| | Firms have been defined as perceiving significant ‘legal & regulatory’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with legal or tax regulations or standards in <MARKET> | | • Or, Protecting your intellectual property | | • Or, Ensuring you get paid and enforcing contracts | | Firms have been defined as perceiving significant ‘customs’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with customs procedures or paperwork | | Firms have been defined as perceiving significant ‘contacts’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Identifying who to make contact with in the first instance or finding a suitable partner | | • Or, Establishing an initial dialogue with prospective customers or business partners in <MARKET> | | • Or, Building relationships with key influencers or decision-makers | | Firms have been defined as perceiving significant ‘information’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Obtaining basic information about doing business in <market> | | Firms have been defined as perceiving significant ‘resource’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Finding the necessary management time to devote to doing business in <MARKET> | | Firms have been defined as perceiving significant ‘language & cultural’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Negotiating the language & culture | | Firms have been defined as perceiving significant ‘bias’ barriers if they scored 4 or 5 on a 5-point scale for… | | • A preference on the part of customers in <MARKET> for doing business with firms from <MARKET> | The table below shows the proportions of firms scoring against each of these summary categories as well as an analysis of the number of individual barriers experienced to a significant extent.

Table 9.1.2 Summary Barriers – By UKTI Usage

| Types of Barriers | Total | UKTI Usage | |-----------------------------------|-------|------------| | | | UKTI User | Non-User | | Base: All exporters | 858 | 227 | 631 | | Legal & regulatory barriers | 41% | 53% | 36% | | Customs barriers | 27% | 34% | 24% | | Contacts barriers | 27% | 37% | 24% | | Information barriers | 16% | 21% | 14% | | Resource barriers | 20% | 25% | 18% | | Language & cultural barriers | 19% | 23% | 18% | | Bias barriers | 17% | 20% | 17% |

| Number of Barriers | | | | |-----------------------------------|-------|-----------|-----------| | At least one significant individual barrier | 66% | 77% | 62% | | - One | 17% | 13% | 19% | | - Two | 15% | 17% | 15% | | - Three | 12% | 16% | 10% | | - Four or more | 22% | 32% | 18% | | No significant barriers | 34% | 23% | 38% |

As has been the case in past UKTI studies, legal and regulatory barriers and contacts barriers are highlighted as being the most important, experienced by 41% and 27% of firms respectively in the selected market. Customs barriers have also been encountered by 27% of firms, and it is worth noting that this is a new barrier that has not been covered in previous UKTI surveys.

Overall, two-thirds of firms report experiencing at least one significant barrier in their selected market (which, it should be noted, is the ‘most challenging market’ they have done business in). Almost a quarter of firms (22%) have encountered significant difficulties with four or more of the individual barriers, suggesting there is a clear need for some form of external assistance to help firms overcome these barriers and successfully trade in overseas markets.

UKTI users clearly come across more significant barriers than non-users, with 77% experiencing at least one, compared to just 62% of non-users. With the exception of language and cultural barriers and bias barriers, users are significantly more likely to encounter each of the barrier types. Perhaps linked to their more limited exposure to overseas markets, small firms with less than 10 employees are less likely to have experienced significant barriers.

Table 9.1.3 Summary Barriers – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base: All exporters | |---------------------|-----------------------------|---------------------| | Up to 5 | 6-10 | Over 10 | | 0-9 | 10-49 | 50-99 | | 100-249 | 250+ | | | Legal & regulatory | 43% | 36% | | Customs | 22% | 25% | | Contacts | 26% | 25% | | Information | 16% | 15% | | Resource | 20% | 20% | | Language & cultural | 18% | 20% | | Bias | 17% | 16% |

Types of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|-----------------|-------------------------| | Legal & regulatory | 63% | 19% | 12% | 7% | 25% | 37% | | Customs | 64% | 19% | 14% | 9% | 21% | 36% | | Contacts | 68% | 16% | 16% | 14% | 22% | 32% | | Information | 61% | 17% | 12% | 10% | 22% | 39% | | Resource | 70% | 18% | 18% | 14% | 20% | 30% | | Language & cultural| 76% | 13% | 15% | 13% | 15% | 24% | | Bias | 76% | 19% | 15% | 15% | 15% | 18% |

There is no evidence that barriers decline as firms become more experienced overseas, and in fact it appears that they actually increase (although this is likely to be partly a function of the fact that firms focussed on their ‘most challenging’ market, and experienced firms have done business in more markets).

Table 9.1.4 Summary Barriers – By Experience

| Years Exporting | Number of Markets | Base: All exporters | |-----------------|-------------------|---------------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Legal & regulatory | 31% | 42% | 44% | 38% | 39% | 46% | | Customs | 18% | 25% | 31% | 19% | 29% | 33% | | Contacts | 27% | 26% | 30% | 23% | 26% | 34% | | Information | 16% | 16% | 16% | 14% | 16% | 20% | | Resource | 21% | 21% | 20% | 17% | 23% | 21% | | Language & cultural | 17% | 21% | 19% | 16% | 19% | 24% | | Bias | 13% | 17% | 19% | 18% | 14% | 20% |

Types of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|-----------------|-------------------------| | Legal & regulatory | 60% | 22% | 11% | 6% | 20% | 40% | | Customs | 64% | 17% | 13% | 11% | 23% | 36% | | Contacts | 71% | 16% | 19% | 15% | 22% | 29% | | Information | 59% | 16% | 14% | 9% | 19% | 41% | | Resource | 67% | 18% | 16% | 12% | 21% | 33% | | Language & cultural| 75% | 17% | 17% | 14% | 27% | 25% | | Bias | 75% | 17% | 17% | 14% | 27% | 25% | As seen below, firms that are active in only one overseas region are significantly less likely to have experienced barriers.

Table 9.1.5 Summary Barriers – By Number of Regions

| Number of Overseas Regions Active In | One | Two | Three | Four | Five | |--------------------------------------|-----|-----|-------|------|------| | Base: All exporters | 270 | 207 | 165 | 104 | 104 |

Types of Barriers

| Types of Barriers | One | Two | Three | Four | Five | |-------------------|-----|-----|-------|------|------| | Legal & regulatory| 35% | 39% | 45% | 44% | 48% | | Customs | 19% | 28% | 31% | 32% | 31% | | Contacts | 23% | 28% | 22% | 34% | 35% | | Information | 13% | 16% | 17% | 16% | 22% | | Resource | 16% | 23% | 21% | 19% | 26% | | Language & cultural| 18% | 17% | 22% | 23% | 23% | | Bias | 17% | 19% | 13% | 21% | 15% |

Number of Barriers

| Number of Barriers | One | Two | Three | Four | Five | |--------------------|-----|-----|-------|------|------| | At least one barrier| 56% | 64% | 69% | 81% | 71% | | - One | 16% | 14% | 21% | 20% | 16% | | - Two | 13% | 14% | 16% | 27% | 12% | | - Three | 8% | 13% | 12% | 12% | 14% | | - Four or more | 19% | 23% | 21% | 22% | 29% | | No significant barriers | 44% | 36% | 31% | 19% | 29% |

Interestingly, non-innovative and non-IP active firms report fewer barriers to overseas trade. This difference is particularly apparent when it comes to legal and regulatory difficulties and contacts barriers.

Table 9.1.6 Summary Barriers – By Innovation

| Innovative | Yes (alternative) | Yes | No | IP Active | Yes | No | |------------|-------------------|-----|----|-----------|-----|----| | Base: All exporters | 378 | 648 | 210 | 210 | 625 |

Types of Barriers

| Types of Barriers | Yes | No | Yes | No | |-------------------|-----|----|-----|----| | Legal & regulatory| 45% | 34%| 50% | 38%| | Customs | 26% | 26%| 30% | 26%| | Contacts | 32% | 17%| 35% | 25%| | Information | 19% | 13%| 16% | 17%| | Resource | 24% | 15%| 22% | 20%| | Language & cultural| 20% | 18%| 21% | 20%| | Bias | 19% | 16%| 19% | 17%|

Number of Barriers

| Number of Barriers | Yes | No | Yes | No | |--------------------|-----|----|-----|----| | At least one barrier| 72% | 55%| 75% | 64%| | - One | 15% | 20%| 13% | 18%| | - Two | 18% | 11%| 17% | 15%| | - Three | 13% | 8% | 17% | 10%| | - Four or more | 26% | 16%| 27% | 21%| | No significant barriers | 28% | 45%| 25% | 36%| Interestingly, firms with substantial growth aspirations are more likely to encounter significant barriers, suggesting that they are most in need of external assistance.

Table 9.1.7 Summary Barriers – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base: All exporters | 108 | 482 | 234 | 192 | 456 | 210 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|---------------------|---------|----------|-------------|----------|---------------------|------| | | 35% | 40% | 47% | 48% | 41% | 34% | | | 23% | 26% | 28% | 28% | 26% | 26% | | | 17% | 27% | 33% | 34% | 29% | 17% | | | 13% | 15% | 21% | 22% | 15% | 13% | | | 14% | 19% | 26% | 28% | 19% | 15% | | | 19% | 19% | 21% | 23% | 19% | 18% | | | 13% | 19% | 19% | 19% | 17% | 16% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 58% | 66% | 72% | 75% | 68% | 55% | | | 20% | 17% | 15% | 14% | 17% | 20% | | | 11% | 15% | 19% | 21% | 15% | 11% | | | 7% | 13% | 9% | 10% | 14% | 8% | | | 19% | 20% | 29% | 31% | 21% | 16% | | | 42% | 34% | 28% | 25% | 32% | 45% |

Young firms that are defined as being ‘born global’ under the alternative, tighter definition are more likely to experience barriers than other firms. ‘Young, technology intensive’ firms are also notably more likely to report resource barriers.

Table 9.1.8 Summary Barriers – By Born Global & Young, Tech Intensive

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|---------------------|---------|----------|-------------|----------|---------------------|------| | | 43% | 46% | 52% | 45% | 41% | | | 22% | 24% | 27% | 26% | 27% | | | 26% | 26% | 32% | 25% | 27% | | | 16% | 18% | 11% | 18% | 16% | | | 20% | 18% | 16% | 28% | 20% | | | 18% | 20% | 34% | 22% | 20% | | | 17% | 18% | 25% | 18% | 18% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 63% | 65% | 77% | 67% | 67% | | | 19% | 18% | 20% | 17% | 17% | | | 12% | 13% | 14% | 12% | 16% | | | 7% | 9% | 11% | 9% | 12% | | | 25% | 26% | 32% | 29% | 21% | | | 37% | 35% | 23% | 33% | 33% | It is also apparent that firms that sell directly to overseas customers are less likely to come across significant barriers than those adopting alternative modes. Generally, those operating overseas sites are most likely to report each of the types of barrier.

Table 9.1.9 Summary Barriers – By Modes Used In Selected Market

| Modes Used In Market | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base: All exporters | 666 | 256 | 48 | 53 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 40% | 24% | 26% | 16% | 18% | 17% | 16% | | | 45% | 30% | 33% | 19% | 25% | 24% | 20% | | | 53% | 23% | 39% | 15% | 30% | 31% | 19% | | | 53% | | | | | | |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 64% | 18% | 15% | 11% | 21% | 36% | | | 75% | 16% | 18% | 15% | 26% | 25% | | | 73% | 9% | 12% | 15% | 38% | 27% | | | 76% | | | | | |

There is clear evidence that high growth markets involve more significant barriers than those in the European Economic Area or other established markets. This is true for all types of barrier, but particularly for legal and regulatory and customs barriers.

Table 9.1.10 Summary Barriers – By Market Type

| Market | High Growth | EEA | Other | |--------|-------------|-----|-------| | Base: All exporters | 184 | 290 | 384 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 57% | 43% | 36% | 24% | 28% | 30% | 20% | | | 31% | 14% | 25% | 11% | 13% | 15% | 20% | | | 40% | 27% | 24% | 16% | 21% | 18% | 14% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 83% | 16% | 20% | 12% | 34% | 17% | | | 56% | 19% | 12% | 11% | 15% | 44% | | | 64% | | | | | | The table below provides analysis of the barriers experienced by individual market. Please note that it has only been possible to provide this analysis for markets selected by at least 30 respondents.

Table 9.1.11 Summary Barriers – By Individual Market

| Market | China | France | Germany | India | Ireland | Italy | Russia | USA | |-----------------|-------|--------|---------|-------|---------|-------|--------|-----| | Base: All exporters | 54 | 62 | 51 | 42 | 36 | 31 | 33 | 98 |

Types of Barriers

| Types of Barriers | China | France | Germany | India | Ireland | Italy | Russia | USA | |-------------------|-------|--------|---------|-------|---------|-------|--------|-----| | Legal & regulatory| 57% | 34% | 33% | 70% | 44% | 34% | 47% | 37% | | Customs | 42% | 20% | 12% | 41% | 3% | 13% | 63% | 26% | | Contacts | 44% | 32% | 40% | 24% | 16% | 22% | 38% | 27% | | Information | 32% | 16% | 16% | 21% | 7% | 17% | 27% | 13% | | Resource | 31% | 16% | 16% | 30% | 6% | 14% | 27% | 20% | | Language & cultural| 40% | 25% | 21% | 24% | 0% | 23% | 28% | 3% | | Bias | 20% | 32% | 31% | 15% | 10% | 26% | 10% | 16% |

Number of Barriers

| Number of Barriers | China | France | Germany | India | Ireland | Italy | Russia | USA | |--------------------|-------|--------|---------|-------|---------|-------|--------|-----| | At least one barrier | 82% | 70% | 67% | 91% | 54% | 58% | 89% | 66% | | - One | 10% | 21% | 21% | 25% | 25% | 15% | 15% | 18% | | - Two | 13% | 9% | 12% | 26% | 19% | 13% | 24% | 19% | | - Three | 15% | 19% | 11% | 7% | 3% | 10% | 25% | 15% | | - Four or more | 45% | 21% | 23% | 33% | 7% | 20% | 26% | 15% | | No significant barriers | 18% | 30% | 33% | 9% | 46% | 42% | 11% | 34% |

Based on the above analysis, there are significant variations in the type and extent of barriers experienced in different markets. India, Russia and China appear to be the most challenging markets, with over 80% of firms selecting these markets reporting at least one significant barrier.

With the exception of bias barriers, the proportion of firms experiencing each barrier was significantly higher than the norm in China. Customs barriers appear to be a particularly difficult issue in Russia (63% reporting these), and legal and regulatory issues are a significant issue in India (70%).

Interestingly, bias barriers (i.e. where firms in an overseas market demonstrate a preference for doing business with other firms from their own market) seem to be a particularly large problem in France and Germany. As seen below, with the exception of EEA markets, UKTI users are still more likely to report significant barriers than non-users even when this data is analysed by the type of market these barriers relate to. This suggests that there is a ‘true’ distinction between users and non-users and the increased likelihood of users reporting barriers (as seen earlier in this section) is not just a result of UKTI users being more likely to be in challenging high growth markets.

Table 9.1.12 Summary Barriers – By Market Type & UKTI Usage

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 74 | 110 | 53 | 237 | 100 | 284 | | Legal & regulatory | 66% | 51% | 36% | 30% | 51% | 36% | | Customs | 55% | 35% | 13% | 15% | 30% | 26% | | Contacts | 44% | 31% | 25% | 25% | 37% | 20% | | Information | 30% | 21% | 9% | 12% | 21% | 14% | | Resource | 28% | 28% | 19% | 11% | 27% | 19% | | Language & cultural | 33% | 28% | 11% | 16% | 22% | 16% | | Bias | 27% | 15% | 19% | 21% | 15% | 14% |

Number of Barriers

| At least one barrier | High Growth | EEA | Other | |----------------------|-------------|-----|-------| | - One | 91% | 77% | 57% | 56% | 77% | 60% | | - Two | 12% | 19% | 16% | 19% | 12% | 18% | | - Three | 18% | 21% | 13% | 11% | 18% | 15% | | - Four or more | 44% | 28% | 19% | 15% | 30% | 17% | | No significant barriers | 9% | 23% | 43% | 44% | 23% | 40% | Similarly, when the analysis compares users and non-users that are active in similar numbers of markets, there is still clear evidence that UKTI users are more likely to report significant barriers.

Table 9.1.13 Summary Barriers – By Number of Markets & UKTI Usage

| Types of Barriers | Up to 5 markets | 6-10 markets | More than 10 markets | |----------------------------|-----------------|--------------|----------------------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 70 | 297 | 55 | 159 | 100 | 168 | | Legal & regulatory | 50% | 35% | 49% | 35% | 58% | 40% | | Customs | 31% | 16% | 29% | 29% | 40% | 29% | | Contacts | 35% | 19% | 35% | 23% | 39% | 31% | | Information | 13% | 14% | 23% | 13% | 25% | 16% | | Resource | 24% | 16% | 27% | 22% | 26% | 18% | | Language & cultural | 23% | 14% | 18% | 20% | 27% | 22% | | Bias | 14% | 19% | 17% | 13% | 25% | 16% |

Number of Barriers

| At least one barrier | 70% | 56% | 73% | 65% | 85% | 68% | | - One | 13% | 18% | 16% | 19% | 12% | 20% | | - Two | 14% | 14% | 15% | 16% | 20% | 15% | | - Three | 14% | 8% | 13% | 12% | 19% | 11% | | - Four or more | 30% | 16% | 29% | 19% | 35% | 22% | | No significant barriers | 30% | 44% | 27% | 35% | 15% | 32% | The tables below show analysis of barriers by age and overseas experience within each of the 3 market types. Overall, there are no consistent or significant differences in this respect, with the possible exception that more experienced exporters appear slightly more likely to report barriers in High Growth and ‘other’ markets.

Table 9.1.14 Summary Barriers – By Market Type & Age

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Up to 5 yrs | 6-10 yrs | Over 10 yrs | Up to 5 yrs | 6-10 yrs | Over 10 yrs | Up to 5 yrs | 6-10 yrs | Over 10 yrs | | Base: All exporters | 35 | 42 | 107 | 96 | 74 | 120 | 97 | 95 | 192 |

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 77% | 81% | 84% | 59% | 55% | 56% | 62% | 63% | 66% | | - One | 20% | 17% | 16% | 21% | 19% | 18% | 16% | 21% | 15% | | - Two | 17% | 14% | 21% | 9% | 18% | 10% | 13% | 12% | 18% | | - Three | 3% | 12% | 14% | 5% | 9% | 13% | 10% | 8% | 14% | | - Four or more | 37% | 38% | 33% | 24% | 9% | 15% | 22% | 22% | 20% | | No significant barriers | 23% | 19% | 16% | 41% | 45% | 44% | 38% | 37% | 34% |

Table 9.1.15 Summary Barriers – By Market Type & Experience

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Up to 2 yrs | 2-10 yrs | Over 10 yrs | Up to 2 yrs | 2-10 yrs | Over 10 yrs | Up to 2 yrs | 2-10 yrs | Over 10 yrs | | Base: All exporters | 22 | 85 | 74 | 54 | 160 | 68 | 65 | 188 | 128 |

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 85% | 82% | 84% | 50% | 56% | 60% | 58% | 63% | 70% | | - One | 26% | 14% | 16% | 25% | 16% | 19% | 18% | 19% | 13% | | - Two | 27% | 15% | 22% | 3% | 14% | 12% | 12% | 13% | 20% | | - Three | 5% | 13% | 14% | 6% | 9% | 16% | 6% | 11% | 15% | | - Four or more | 26% | 40% | 32% | 16% | 16% | 13% | 21% | 20% | 21% | | No significant barriers | 15% | 18% | 16% | 50% | 44% | 40% | 42% | 37% | 30% | When interpreting the data below, the low base sizes for firms with 250+ employees should be taken into account. With this in mind, it generally seems that for each type of market, smaller firms are less likely they are to have experienced significant barriers.

Table 9.1.16 Summary Barriers – By Market Type & Size

| Base: All exporters | High Growth | EEA | Other | |---------------------|-------------|-----|-------| | 0-9 | 10-249 | 250+| SME total | | 91 | 80 | 11 | 171 | | 193 | 87 | 6 | 280 | | 226 | 129 | 18 | 355 |

Types of Barriers

| Legal & regulatory | 55% | 62% | 45% | 59% | 29% | 34% | 20% | 31% | 36% | 46% | 39% | 40% | | Customs | 47% | 40% | 45% | 44% | 13% | 17% | 0% | 15% | 25% | 30% | 28% | 27% | | Contacts | 34% | 35% | 45% | 35% | 23% | 27% | 20% | 24% | 19% | 30% | 34% | 24% | | Information | 27% | 23% | 18% | 25% | 11% | 12% | 0% | 12% | 14% | 16% | 23% | 15% | | Resource | 33% | 23% | 27% | 28% | 15% | 9% | 20% | 13% | 20% | 25% | 6% | 22% | | Language & cultural| 30% | 33% | 18% | 31% | 10% | 24% | 0% | 15% | 19% | 16% | 23% | 18% | | Bias | 17% | 20% | 36% | 19% | 19% | 23% | 20% | 20% | 15% | 12% | 6% | 14% |

Number of Barriers

| At least one barrier | 82% | 81% | 91% | 82% | 53% | 63% | 40% | 56% | 60% | 71% | 73% | 64% | | - One | 17% | 12% | 27% | 15% | 19% | 17% | 20% | 18% | 16% | 20% | 6% | 18% | | - Two | 15% | 25% | 9% | 21% | 9% | 18% | 0% | 12% | 14% | 15% | 39% | 14% | | - Three | 13% | 10% | 27% | 11% | 7% | 16% | 20% | 10% | 11% | 15% | 6% | 13% | | - Four or more | 37% | 33% | 27% | 35% | 18% | 12% | 0% | 16% | 20% | 21% | 23% | 20% | | No sig. barriers | 18% | 19% | 9% | 18% | 47% | 37% | 60% | 44% | 40% | 29% | 27% | 36% |

As seen below, production sector firms appear marginally more likely to experience barriers to overseas trade, although this difference does not appear in EEA markets.

Table 9.1.17 Summary Barriers – By Market Type & Sector

| Base: All exporters | Total | High Growth | EEA | Other | |---------------------|-------|-------------|-----|-------| | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | | 287 | 552 | 72 | 110 | 90 | 188 | 125 | 254 |

Types of Barriers

| Legal & regulatory | 42% | 40% | 57% | 56% | 23% | 35% | 47% | 36% | | Customs | 30% | 25% | 37% | 47% | 18% | 12% | 33% | 23% | | Contacts | 32% | 25% | 43% | 31% | 24% | 26% | 30% | 21% | | Information | 18% | 15% | 21% | 26% | 12% | 9% | 19% | 14% | | Resource | 22% | 19% | 30% | 25% | 14% | 12% | 24% | 21% | | Language & cultural| 19% | 19% | 36% | 25% | 12% | 16% | 15% | 19% | | Bias | 18% | 17% | 21% | 18% | 19% | 21% | 15% | 14% |

Number of Barriers

| At least one barrier | 70% | 64% | 86% | 80% | 55% | 56% | 71% | 61% | | - One | 17% | 17% | 16% | 17% | 16% | 19% | 19% | 15% | | - Two | 16% | 15% | 23% | 17% | 11% | 11% | 16% | 16% | | - Three | 11% | 12% | 12% | 13% | 11% | 11% | 12% | 12% | | - Four or more | 25% | 20% | 35% | 33% | 17% | 15% | 24% | 19% | | No significant barriers | 30% | 36% | 14% | 20% | 45% | 44% | 29% | 39% | 9.2 Barriers (Detailed)

9.2.1 Dealing With Legal Or Tax Regulations & Standards (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.1 Dealing With Legal Or Tax Regulations & Standards

Dealing with legal or tax regulations and standards is one of the most widespread barriers, with 23% of firms experiencing it to a significant extent (i.e. 4 or 5 out of 5). Overall, 52% of internationalising firms reported at least some difficulties in this respect (i.e. 2-5 out of 5), with this more likely to be the case amongst UKTI users. 9.2.2 Protecting Your Intellectual Property (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.2 Protecting Your Intellectual Property

Only 14% of firms reported a significant problem with protecting their intellectual property, meaning that it was the least problematic of the barriers tested. However, it is clearly still an issue for a large number of firms, with 37% indicating that they had experienced at least some difficulties in this respect (i.e. 2-5 out of 5). As seen below, firms that hold some form of IP protection are more likely to experience difficulties protecting it overseas. However, it is interesting to note that around a third of those with no IP protection report some degree of difficulty in protecting their IP (i.e. give a score of 2-5 out of 5).

Table 9.2.2 Protecting Your Intellectual Property – By IP Activity

| IP Active | Yes | No | |----------------------------|-----|----| | Base: All exporters | 210 | 625| | 5 – Extremely difficult | 11% | 6% | | 4 | 8% | 6% | | 3 | 15% | 10%| | 2 | 15% | 12%| | 1 – Not at all difficult | 48% | 65%| | Don't know | 2% | 2% | 9.2.3 Ensuring You Get Paid & Enforcing Contracts (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.3 Ensuring You Get Paid & Enforcing Contracts

Overall, 55% of internationalising firms reported at least some problems with getting paid and enforcing contracts, with 23% indicating it had been a significant difficulty (i.e. 4-5 out of 5). As with all the barriers, UKTI users were more likely to encounter this issue. 9.2.4 Dealing With Customs Procedures & Paperwork (Customs Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.4 Dealing With Customs Procedures & Paperwork

Over a quarter of internationalising firms (27%) have experienced significant difficulties with customs procedures, making it the most widely reported of the barriers tested. Furthermore, 59% of firms have had at least some problems in this respect (i.e. score 2-5 out of 5), with this proportion increasing to 67% amongst UKTI users. 9.2.5 Identifying Who To Make Contact With In The First Instance (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.5 Identifying Who To Make Contact With In The First Instance

Just under half of all firms (48%) have experienced some level of difficulty with identifying initial contacts in their selected market, with 17% judging this to have been a significant barrier (i.e. scoring 4-5 out of 5). The majority of UKTI users (58%) have experienced at least some problems with this issue, which is consistent with other survey data that shows that a need to access suitable contacts is one of the major reasons for using UKTI support. 9.2.6 Establishing An Initial Dialogue With Prospective Customers Or Partners (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.6 Establishing An Initial Dialogue With Prospective Customers Or Partners

Whilst only 14% of firms indicated that this had been a significant difficulty in their selected market, half (51%) reported at least some problems in this respect. Once again, this was more likely to be an issue for UKTI users. 9.2.7 Building Relationships With Key Influencers Or Decision Makers (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.7 Building Relationships With Key Influencers Or Decision Makers

Overall, 56% of internationalising firms had experienced at least some difficulty in building relationships overseas, with this proportion increasing markedly (to 67%) amongst UKTI users. However, only 16% of all firms (and 21% of users) felt that this had been a significant problem. 9.2.8 Obtaining Basic Information About Doing Business In The Market (Information Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.8 Obtaining Basic Information About Doing Business In The Market

Overall, 55% of internationalising firms had experienced at least some problems in accessing basic information about doing business in their selected market, with 16% judging this to be a significant barrier. This highlights the need for an organisation such as UKTI to help fill these knowledge gaps, and the fact that UKTI users are more likely to report this barrier suggests that this is one of the key reasons why firms approach UKTI. 9.2.9 Finding The Necessary Management Time To Devote To Doing Business In The Market (Resource Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.9 Finding The Necessary Management Time To Devote To Doing Business In The Market

A lack of time and resources is clearly a barrier to the development of overseas business for many firms, with 55% indicating that they had had some difficulties in this respect (and 20% claiming it has been a significant problem in their selected market). As seen in Section 9.1, this issue effects firms of all sizes and is not just confined to those with relatively few staff. Once again, users of UKTI are more likely to report this barrier, emphasising the importance of UKTI’s role in helping firms use their often limited resources most effectively. 9.2.10 Negotiating The Language & Culture (Language & Cultural Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.10 Negotiating The Language & Culture

Overall, 19% of all internationalising firms have experienced significant problems with the language or cultural differences in their chosen market, with almost half (48%) reporting at least some difficulty in this regard. Again, this barrier is more likely to have been experienced by UKTI users. 9.2.11 A Preference On The Part Of Customers In The Market For Doing Business With Other Firms From That Market (Bias Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.11 A Preference On The Part Of Customers In The Market For Doing Business With Other Firms From That Market

Around half (49%) of firms claim to have encountered this problem to at least some extent (i.e. score 2-5 out of 5), with 17% indicating that it has been a significant barrier. 10. Benefits of Doing Business Overseas

10.1 Benefits

All firms were read out 4 possible benefits of doing business overseas, and asked to indicate the extent to which each one applied to them, on a 5 point scale where 5 meant they had benefited ‘to a critical extent’ and 1 meant ‘to no extent’. The chart below summarises these results.

The most widespread benefit of exporting is that it enables firms to achieve a level of growth otherwise not possible, with 38% of firms indicating that they have benefited in this way to a significant extent (i.e. scoring 4-5 out of 5).

Similar proportions of internationalising firms have benefited from being able to better use their existing capacity and through being exposed to new ideas (30% and 28% experiencing significant benefits respectively). Whilst it is the least widespread of the benefits tested, approaching a quarter of firms (22%) have still benefited significantly from exporting increasing the lifespan of their products or services. The table below provides further analysis UKTI users and non-users, showing the proportion of firms experiencing each benefit to a significant extent (4-5 out of 5) and to a moderate extent (3-5 out of 5). It is clear from this analysis that, as well as experiencing more barriers (as seen in Section 9), UKTI clients also report consistently greater benefits from overseas trade.

Table 10.1.1 Benefits of Overseas Business – By UKTI Usage

| Base | Total | UKTI Usage | | | | |------|-------|------------|---|---|---| | | | UKTI User | Non-User | | | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | | Growth | 38% | 48% | 34% | | | | Utilising capacity | 30% | 38% | 28% | | | | New ideas | 28% | 38% | 24% | | | | Increased lifespan | 22% | 33% | 18% | | | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | | Growth | 56% | 68% | 52% | | | | Utilising capacity | 53% | 63% | 49% | | | | New ideas | 48% | 59% | 44% | | | | Increased lifespan | 37% | 50% | 33% | | | | Summary | | | | | | | At least one sig. benefit | 54% | 69% | 49% | | | | At least one mod. benefit | 77% | 87% | 73% | | | | No sig. or mod. benefit | 23% | 13% | 27% | | |

The likelihood of reporting significant benefits appears to increase with age and size. However, this difference is likely to be largely to be at least partially due to the fact that these firms have been doing business overseas for longer.

Table 10.1.2 Benefits of Overseas Business – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | | | | | |---------------------|---------------------------|---|---|---|---| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | | | | | | | Growth | 35% | 37% | 39% | 35% | 39% | 48% | 47% | 51% | | | | Utilising capacity | 23% | 29% | 33% | 27% | 32% | 33% | 45% | 45% | | | | New ideas | 30% | 25% | 29% | 27% | 24% | 42% | 47% | 27% | | | | Increased lifespan | 19% | 21% | 23% | 21% | 22% | 20% | 23% | 36% | | | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | | | | | | | Growth | 52% | 54% | 58% | 52% | 61% | 68% | 63% | 66% | | | | Utilising capacity | 44% | 50% | 56% | 46% | 59% | 60% | 65% | 75% | | | | New ideas | 51% | 47% | 48% | 47% | 44% | 58% | 55% | 63% | | | | Increased lifespan | 35% | 39% | 38% | 39% | 35% | 38% | 32% | 48% | | | | Summary | | | | | | | | | | | | At least one sig. benefit | 49% | 54% | 56% | 51% | 53% | 68% | 72% | 66% | | | | At least one mod. benefit | 72% | 77% | 78% | 73% | 79% | 83% | 84% | 84% | | | | No sig. or mod. benefit | 28% | 23% | 22% | 27% | 21% | 17% | 16% | 16% | | | As might be expected, the longer a firm has been doing business overseas and the more markets they operate in, the more likely they are to report significant benefits.

Table 10.1.3 Benefits of Overseas Business – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 185 | 433 | 270 | 411 | 214 | 268 |

Proportion benefiting significantly (4-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | |-----------------|-----------------|-----------------|-----------------|-----------------| | Less than 2 years | 29% | 23% | 26% | 16% | | 2-10 years | 35% | 27% | 27% | 22% | | Over 10 years | 45% | 39% | 30% | 25% | | Up to 5 | 25% | 20% | 21% | 16% | | 6-10 | 34% | 34% | 24% | 18% | | More than 10 | 58% | 41% | 41% | 33% |

Proportion benefiting moderately (3-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | |-----------------|-----------------|-----------------|-----------------|-----------------| | Less than 2 years | 50% | 44% | 49% | 35% | | 2-10 years | 54% | 48% | 47% | 37% | | Over 10 years | 62% | 63% | 50% | 39% | | Up to 5 | 41% | 43% | 39% | 31% | | 6-10 | 60% | 54% | 48% | 33% | | More than 10 | 74% | 65% | 60% | 49% |

Summary

| | At least one sig. benefit | At least one mod. benefit | No sig. or mod. benefit | |-----------------|-----------------|-----------------|-----------------| | Growth | 47% | 74% | 26% | | Utilising capacity | 53% | 74% | 26% | | New ideas | 61% | 81% | 19% | | Increased lifespan | 40% | 65% | 35% |

There is also a clear correlation between the number of overseas regions firms are active in and the extent to which they benefit from doing business overseas.

Table 10.1.4 Benefits of Overseas Business – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |-----------------|------|-----|-----|-------|------|------| | Base | 44 | 270 | 207 | 165 | 104 | 104 |

Proportion benefiting significantly (4-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | |-----------------|-----------------|-----------------|-----------------|-----------------| | None | 38% | 40% | 43% | 26% | | One | 25% | 19% | 16% | 15% | | Two | 33% | 29% | 25% | 20% | | Three | 40% | 30% | 36% | 22% | | Four | 52% | 40% | 35% | 32% | | Five | 60% | 48% | 39% | 31% |

Proportion benefiting moderately (3-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | |-----------------|-----------------|-----------------|-----------------|-----------------| | None | 70% | 71% | 77% | 58% | | One | 41% | 41% | 33% | 26% | | Two | 50% | 51% | 43% | 38% | | Three | 60% | 52% | 52% | 40% | | Four | 71% | 64% | 64% | 50% | | Five | 80% | 66% | 64% | 42% |

Summary

| | At least one sig. benefit | At least one mod. benefit | No sig. or mod. benefit | |-----------------|-----------------|-----------------|-----------------| | Growth | 68% | 91% | 9% | | Utilising capacity | 37% | 63% | 37% | | New ideas | 51% | 73% | 27% | | Increased lifespan | 57% | 81% | 19% | It is also the case that innovative and IP active firms experience the greatest benefits from overseas trade, and this is consistent with previous UKTI survey data.

Table 10.1.5 Benefits of Overseas Business – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | **Base** | 398 | 680 | 222 | 224 | 655 |

**Proportion benefiting significantly (4-5 out of 5) from...**

| | Growth | Utilising capacity | New ideas | Increased lifespan | |----------------------|--------|--------------------|-----------|--------------------| | **Yes** | 45% | 36% | 35% | 28% | | **No** | 40% | 32% | 31% | 23% |

**Proportion benefiting moderately (3-5 out of 5) from...**

| | Growth | Utilising capacity | New ideas | Increased lifespan | |----------------------|--------|--------------------|-----------|--------------------| | **Yes** | 62% | 56% | 58% | 46% | | **No** | 59% | 54% | 53% | 40% |

**Summary**

| | At least one sig. benefit | At least one mod. benefit | No sig. or mod. benefit | |----------------------|---------------------------|---------------------------|-------------------------| | **Yes** | 63% | 81% | 19% | | **No** | 57% | 79% | 21% |

Firms with more ambitious growth objectives also report greater benefits, suggesting that the benefits generated from overseas business might be acting as a catalyst for this growth.

Table 10.1.6 Benefits of Overseas Business – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------------|-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | **Base** | 108 | 510 | 248 | 204 | 476 | 222 |

**Proportion benefiting significantly (4-5 out of 5) from...**

| | Growth | Utilising capacity | New ideas | Increased lifespan | |----------------------|--------|--------------------|-----------|--------------------| | **Yes** | 29% | 25% | 18% | 22% | | **No** | 36% | 29% | 28% | 20% |

**Proportion benefiting moderately (3-5 out of 5) from...**

| | Growth | Utilising capacity | New ideas | Increased lifespan | |----------------------|--------|--------------------|-----------|--------------------| | **Yes** | 46% | 44% | 39% | 37% | | **No** | 55% | 55% | 48% | 20% |

**Summary**

| | At least one sig. benefit | At least one mod. benefit | No sig. or mod. benefit | |----------------------|---------------------------|---------------------------|-------------------------| | **Yes** | 44% | 66% | 34% | | **No** | 54% | 78% | 22% |

OMB Research Ltd Report – D5 99 Firms that were classified as ‘born global’ using the alternative, tighter definition report consistently higher benefits (but there is no difference when the standard ‘born global’ definition is used). Firms that are classified as ‘young, technology intensive’ also appear to benefit more than other young firms.

Table 10.1.7 Benefits of Overseas Business – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base | 255 | 136 | 44 | 126 | 647 | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | | Growth | 35% | 31% | 61% | 39% | 38% | | Utilising capacity | 23% | 21% | 43% | 26% | 32% | | New ideas | 30% | 30% | 45% | 36% | 28% | | Increased lifespan | 19% | 19% | 36% | 21% | 23% | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | | Growth | 52% | 48% | 80% | 56% | 57% | | Utilising capacity | 44% | 40% | 73% | 47% | 54% | | New ideas | 51% | 46% | 61% | 56% | 48% | | Increased lifespan | 35% | 32% | 50% | 42% | 38% | | Summary | | | | | | | At least one sig. benefit | 49% | 46% | 73% | 55% | 55% | | At least one mod. benefit | 72% | 65% | 91% | 79% | 77% | | No sig. or mod. benefit | 28% | 35% | 9% | 21% | 23% | 10.2 Impact on Product & Service Development

All firms were asked whether their experiences of doing business overseas had let them to develop and new products and services or modify any existing ones, with the following results.

Chart 10.2.1 Impact On Product/Service Development

| Develop any new products or services | 38% | | Make changes or modifications to any existing products or services | 46% | | Neither | 46% |

Base: All respondents (Base, Don't know) (902, 1%)

Just over half of all firms (53%) reported some degree of impact on their product or service development activity, with 38% indicating that doing business overseas had prompted them to develop new products or services and 46% that it had encouraged them to change or modify existing products or services.

As seen below, UKTI users are significantly more likely to have introduced new products or services or modified existing ones as a direct result of their overseas activity. Where the impact on product/service development related to changing or modifying existing products, in most cases this was felt to be a fundamental change rather than just cosmetic changes (such as packaging or translation), and this is true of both users and non-users.

Table 10.2.1 Impact On Product/Service Development – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |------------|-------|-----------|----------| | Base | 902 | 235 | 667 | | Develop new products/services | 38% | 44% | 36% | | Change/modify existing ones | 46% | 56% | 42% | | - Something cosmetic | 17% | 20% | 15% | | - Something more fundamental | 35% | 45% | 31% | | Neither | 46% | 35% | 51% | | Don't know | 1% | 1% | 1% | Larger firms are more likely to have developed or modified their products or services, but there is no difference in this respect by age of firm.

Table 10.2.2 Impact On Product/Service Development – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Develop new products/services | Change/modify existing ones | - Something cosmetic | - More fundamental | Neither | Don't know | |---------------------|-----------------------------|------|-------------------------------|-----------------------------|---------------------|-------------------|---------|------------| | Up to 5 | 6-10 | 255 | 37% | 46% | 18% | 36% | 45% | 0% | | 6-10 | 219 | 428 | 36% | 44% | 19% | 30% | 48% | 0% | | Over 10 | 545 | 222 | 36% | 46% | 15% | 36% | 46% | 1% | | 0-9 | 545 | 222 | 35% | 41% | 14% | 32% | 50% | 1% | | 10-49 | 52 | 28 | 45% | 49% | 19% | 35% | 46% | 0% | | 50-99 | 56 | 59% | 59% | 52% | 25% | 53% | 34% | 0% | | 100-249 | 52 | 58% | 58% | 58% | 25% | 36% | 30% | 0% | | 250+ | 35 | 35% | 35% | 35% | 13% | 24% | 30% | 0% |

As expected, innovative and IP active firms are significantly more likely to report an impact of overseas business on their product or service development activity.

Table 10.2.3 Impact On Product/Service Development – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Develop new products/services | 50% | 45% | 16% | 53% | 33% | | Change/modify existing ones | 58% | 54% | 21% | 60% | 41% | | - Something cosmetic | 20% | 19% | 8% | 26% | 13% | | - More fundamental | 45% | 41% | 16% | 45% | 32% | | Neither | 33% | 38% | 72% | 31% | 52% | | Don't know | 1% | 1% | 1% | 0% | 1% |

Firms with substantial growth aspirations are significantly more likely to have developed new products or services and made fundamental changes to existing ones. This might suggest that ambitious firms are more open to tailoring their offering to market requirements in order to help them realise their growth potential. Innovative high growth firms are particularly likely to have developed or modified their offering as a result of their overseas activities.

Table 10.2.4 Impact On Product/Service Development – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Develop new products/services | 25% | 37% | 47% | 54% | 42% | 16% | | Change/modify existing ones | 33% | 44% | 55% | 61% | 51% | 21% | | - Something cosmetic | 9% | 16% | 20% | 21% | 19% | 8% | | - More fundamental | 27% | 33% | 43% | 49% | 38% | 16% | | Neither | 60% | 48% | 37% | 31% | 41% | 72% | | Don't know | 1% | 1% | 0% | 0% | 1% | 1% | Firms that are defined as ‘born global’ by the alternative definition are particularly likely to have developed new products/services or modified existing ones, and ‘young technology intensive’ firms are also more likely to have done so.

Table 10.2.5 Impact On Product/Service Development – By Born Global & Young, Tech Intensive

| | Up to 5 years old | | | Over 5 years old | |----------------------|-------------------|----------------------|----------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 255 | 136 | 44 | 126 | 647 | | Develop new products/services | 37% | 36% | 52% | 44% | 38% | | Change/modify existing ones | 46% | 46% | 61% | 55% | 46% | | - Something cosmetic | 18% | 15% | 14% | 27% | 16% | | - More fundamental | 36% | 37% | 57% | 40% | 35% | | Neither | 45% | 46% | 30% | 36% | 47% | | Don’t know | 0% | 0% | 0% | 0% | 1% |

Whilst there are no significant differences between production and service sector firms when it comes to the proportion developing new products or services as a result of their overseas activities, it does appear that the former are slightly more likely to modify existing products.

Table 10.2.6 Impact On Product/Service Development – By Sector

| | Production | Services | |----------------------|------------|----------| | Base | 297 | 586 | | Develop new products/services | 41% | 37% | | Change/modify existing ones | 50% | 43% | | - Something cosmetic | 21% | 14% | | - More fundamental | 39% | 33% | | Neither | 44% | 48% | | Don’t know | 0% | 1% |

As seen below, firms engaged in less ‘traditional’ internationalisation modes (i.e. not just selling direct) are more likely to report an impact on their product or service development activity.

Table 10.2.7 Impact On Product/Service Development – By Modes Used

| | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base | 815 | 361 | 79 | 113 | | Develop new products/services | 37% | 50% | 63% | 57% | | Change/modify existing ones | 45% | 56% | 73% | 70% | | - Something cosmetic | 16% | 25% | 28% | 23% | | - More fundamental | 34% | 42% | 56% | 57% | | Neither | 47% | 34% | 20% | 24% | | Don’t know | 1% | 1% | 0% | 1% | In cases where overseas business had influenced firms’ product/service development, firms were asked whether this development activity was designed for overseas customers, UK customers or both.

Chart 10.2.2 Geographic Focus Of Product/Service Development

In most cases where doing business overseas had influenced product or service development, this activity had been carried out with both the UK market and overseas markets in mind. As seen below, this is true for both users and non-users of UKTI.

Table 10.2.8 Geographic Focus Of Product/Service Development – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 902 | 235 | 667 | | Overseas customers | 12% | 17% | 10% | | UK customers | 2% | 2% | 2% | | Both | 36% | 43% | 33% | | Overseas business has not prompted | 46% | 35% | 50% | | any product/service development | | | | | Don’t know | 0% | 0% | 0% | | Not yet exporting | 4% | 3% | 4% | As seen below, there is little difference between the production and service sectors in this respect.

Table 10.2.9 Geographic Focus Of Product/Service Development – By Sector

| Sector | Production | Services | |---------------------------------------------|------------|----------| | Base | 297 | 586 | | Overseas customers | 10% | 12% | | UK customers | 3% | 2% | | Both | 26% | 34% | | Overseas business has not prompted any product/service development | 44% | 47% | | Don’t know | 0% | 0% | | Not yet exporting | 3% | 5% |

Those firms that had undertaken product or service development activity specifically for overseas customers were asked why this had been done.

Chart 10.2.3 Reasons For Undertaking Product/Service Development For Overseas Customers

- To comply with regulations or legal requirements overseas: 16%
- To solve technical or practical issues relating to overseas countries: 14%
- To take account of different cultures or consumer preferences overseas: 8%
- In response to specific requests from overseas customers: 7%
- Not done any product/service development for overseas customers: 48%

Base: All respondents (Base, None of these, Don’t know, Not yet exporting) (902, 2%, 0%, 4%)

The main catalysts for undertaking product or service development activity for overseas customers are a need to comply with overseas regulations and in order to solve technical or practical issues that apply in particular overseas markets. UKTI users are more likely to undertake innovation activity to comply with overseas regulations and to solve technical or practical issues. However, it should be noted that much of this difference is due to the fact that users are considerably more likely than non-users to be doing any product or service development activity for overseas customers.

Table 10.2.10 Reasons For Undertaking Product/Service Development For Overseas Customers – By UKTI Usage

| Reason | Total | UKTI Usage | | | |---------------------------------------------|-------|------------|----------|----------| | | Base | UKTI User | Non-User | | Comply with regulations etc | 16% | 22% | 14% | | Solve technical/practical issues | 14% | 19% | 12% | | Different cultures or preferences | 8% | 8% | 8% | | Customer requests | 7% | 9% | 7% | | None of these | 2% | 2% | 3% | | Not done product/service development for overseas customers | 48% | 37% | 53% | | Don’t know | 0% | 0% | 0% | | Not yet exporting | 4% | 3% | 4% |

As seen below, production sector firms are more likely to undertake product or service development to solve technical issues encountered overseas. They also appear more likely than service sector firms to do this in order to comply with overseas regulations, although this difference is not statistically significant.

Table 10.2.11 Reasons For Undertaking Product/Service Development For Overseas Customers – By Sector

| Reason | Sector | | | |---------------------------------------------|--------|----------|----------| | | Base | Production | Services | | Comply with regulations etc | 19% | 15% | | Solve technical/practical issues | 17% | 12% | | Different cultures or preferences | 8% | 8% | | Customer requests | 6% | 8% | | None of these | 1% | 3% | | Not done product/service development for overseas customers | 47% | 49% | | Don’t know | 0% | 0% | | Not yet exporting | 3% | 5% | Firms were also asked a number of questions to ascertain the extent to which internationalisation impacts on investment in product and service development activity. These results are summarised below.

Chart 10.2.4 Impacts On Investment In Product/Service Development

- Prompted you to invest more time and money in product or service development: 38%
- Increased the amount of money you have available to invest in product or service development: 37%
- Increased the return on investment that you get from product or service development: 46%

Base: All respondents (Base, No product/service development) (902, 2%, 35%)

Internationalisation can clearly increase the rewards from innovation activity, with approaching half of all firms (46%) reporting that doing business overseas had increased the return they received from their investment in product or service development. Over a third (38%) felt that doing business overseas had encouraged them to invest more resources in these activities, and a similar proportion (37%) indicated that it had enabled them to invest more money in product or service development activity.

As seen below, users of UKTI are more likely to report all of these impacts, particularly the increased return on investment on product/service development activity.

Table 10.2.12 Impacts On Investment In Product/Service Development – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |------------|-------|-----------|----------| | Base | 902 | 235 | 667 | | Invest more time and money in NPD | 38% | 50% | 34% | | Increase money available for NPD | 37% | 46% | 34% | | Increase ROI in NPD | 46% | 60% | 41% | Whilst there are no clear differences in this respect by age of firm, larger companies with 100 or more employees are more likely to report these positive impacts on product/service development investment.

Table 10.2.13 Impacts On Investment In Product/Service Development – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|---------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Invest more time and money in NPD | | 38% | 35% | 39% | 35% | 36% | 55% | 52% | 52% | | Increase money available for NPD | | 34% | 40% | 37% | 37% | 37% | 31% | 49% | 47% | | Increase ROI in NPD | | 40% | 46% | 47% | 41% | 47% | 54% | 62% | 66% |

As might be expected, innovative firms and those that are IP active are significantly more likely to indicate that doing business overseas has increased the resources they devote to product/service development, the capital they have available for it and the return they receive.

Table 10.2.14 Impacts On Investment In Product/Service Development – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Invest more time and money in NPD | 51% | 45% | 17% | 51% | 34% | | Increase money available for NPD | 49% | 43% | 20% | 51% | 33% | | Increase ROI in NPD | 59% | 52% | 26% | 64% | 40% |

These impacts on product/service development investment are most likely to be experienced by firms with substantial growth objectives, and particularly innovative high growth firms.

Table 10.2.15 Impacts On Investment In Product/Service Development – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Invest more time and money in NPD | 27% | 35% | 51% | 57% | 40% | 17% | | Increase money available for NPD | 25% | 36% | 47% | 52% | 39% | 20% | | Increase ROI in NPD | 34% | 45% | 56% | 61% | 49% | 26% | Firms defined as being ‘born global’ by the alternative, tighter definition and those that are ‘young, technology intensive’ are also more likely to report these product/service development benefits.

Table 10.2.16 Impacts On Investment In Product/Service Development – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 255 | 136 | 44 | 126 | | Invest more time and money in NPD | 38% | 36% | 52% | 52% | | Increase money available for NPD | 34% | 34% | 48% | 40% | | Increase ROI in NPD | 40% | 42% | 55% | 48% |

Interestingly, firms operating in the production sector are more likely to indicate that doing business overseas increases the return on investment they obtain from product/service development activities. However, there is no difference by sector when it comes to investing more in these activities or increasing the money available for product/service development.

Table 10.2.17 Impacts On Investment In Product/Service Development – By Sector

| | Sector | |----------------------|--------| | | Production | Services | | Base | 297 | 586 | | Invest more time and money in NPD | 39% | 38% | | Increase money available for NPD | 39% | 37% | | Increase ROI in NPD | 51% | 43% |

Firms involved in less traditional internationalisation modes (i.e. not just selling direct) are more likely to report these innovation benefits, and this is particularly true of those involved in contractual arrangements such as licensing, franchising or joint venturing.

Table 10.2.18 Impacts On Investment In Product/Service Development – By Modes Used

| | Modes Used | |----------------------|------------| | | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | | Base | 815 | 361 | 79 | 113 | | Invest more time and money in NPD | 37% | 49% | 66% | 59% | | Increase money available for NPD | 38% | 45% | 68% | 55% | | Increase ROI in NPD | 46% | 59% | 80% | 70% | 11. Opportunities in Emerging & Fast Growing Markets

11.1 Opportunities in Emerging & Fast Growing Markets

Firms were asked to consider the extent to which they felt that there were opportunities for them in a number of emerging or fast growing markets. For each market, firms were asked to indicate whether they were already doing business there, were very likely to do so in the next 2 years, quite likely to do so or unlikely to do so.

Chart 11.1.1 Opinions On Opportunities In Emerging & Fast Growing Markets

Of these markets, it appears that Saudi Arabia and the UAE represents the best opportunity for internationalising firms, with 24% of firms already doing business there and a further 26% very or quite likely to do so in the next 2 years.

South Africa, China and India are also felt to be relatively good opportunities, with a little under half of all firms either already operating in these markets or likely to do so. However, there appears to be least appetite for the Mexican and Brazilian markets. Results have been summarised as follows.

| Opportunities In Emerging & Fast Growing Markets - Summary | |----------------------------------------------------------| | **Firms have been defined as ‘already in’ if they...** | | • Are already in at least one emerging/fast growing market | | **Firms have been defined as being ‘very likely’ if they...** | | • Are not already in any of the emerging/fast growing markets | | • But feel they are ‘very likely’ to do business in at least one in the next 2 years | | **Firms have been defined as being ‘quite likely’ if they...** | | • Are not already in any of the emerging/fast growing markets | | • Do not feel that they are ‘very likely’ to do business in any in the next 2 years | | • But feel they are ‘quite likely’ to do business in at least one in next 2 years | | **Firms have been defined as ‘unlikely’ if they...** | | • Are not already in any of the emerging/fast growing markets |

When the data is viewed in this way, it shows that around half (48%) of internationalising firms are already doing business in at least one of the emerging/fast growing markets. Most of the remainder feel that they are very or quite likely to enter at least one of these markets in the next 2 years.

Chart 11.1.2 Opportunities In Emerging & Fast Growing Markets (Summary)

- **Already in**: 48%
- **Very likely**: 10%
- **Quite likely**: 22%
- **Unlikely**: 19%

Base: All respondents (Base, Don't know) (902, 1%) As seen below, the majority of UKTI users are already in at least one of these markets, and only 10% feel that they are unlikely to enter one in the next 2 years.

Table 11.1.1 Opportunities In Emerging & Fast Growing Markets (Summary) – By UKTI Usage

| | Total | UKTI Usage | |------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Already in | 48% | 61% | 44% | | Very likely | 10% | 11% | 9% | | Quite likely | 22% | 18% | 23% | | Unlikely | 19% | 10% | 22% | | Don't know | 1% | 0% | 2% |

Older firms and larger firms are more likely to already be operating in emerging or fast growing markets. However, it is not the case that these markets are only targeted by more established firms, as over a third of firms in the youngest age band (established up to 5 years) and the smallest size band (0-9 employees) are already doing business in at least one of these areas, and most of the remainder have some intention of doing so in the next 2 years.

Table 11.1.2 Opportunities In Emerging & Fast Growing Markets (Summary) – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Already in | 36% | 45% | 53% | 42% | 52% | 66% | 62% | 74% | | Very likely | 16% | 8% | 9% | 10% | 9% | 14% | 4% | 9% | | Quite likely | 27% | 24% | 20% | 24% | 20% | 16% | 14% | 11% | | Unlikely | 19% | 22% | 17% | 22% | 18% | 4% | 16% | 6% | | Don't know | 2% | 1% | 1% | 1% | 1% | 0% | 4% | 0% |

There is clear evidence that firms tend to enter fast growing markets later in their international life-cycle, with those that have been exporting longest significantly more likely to be operating in these markets. However, around a quarter of those that have been exporting for less than 2 years are already operating in these areas.

Table 11.1.3 Opportunities In Emerging & Fast Growing Markets (Summary) – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 185 | 433 | 270 | 411 | 214 | 268 | | Already in | 28% | 47% | 59% | 24% | 52% | 79% | | Very likely | 18% | 8% | 10% | 11% | 8% | 9% | | Quite likely | 29% | 23% | 18% | 29% | 24% | 10% | | Unlikely | 23% | 22% | 13% | 34% | 15% | 2% | | Don't know | 2% | 1% | 1% | 1% | 1% | 0% | Unsurprisingly, the more overseas regions a firm is active in, the more likely they are to be doing business in any of the emerging or fast growing markets.

Table 11.1.4 Opportunities In Emerging & Fast Growing Markets (Summary) – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |-------------------------------------|------|-----|-----|-------|------|------| | Base | 44 | 270 | 207 | 165 | 104 | 104 | | Already in | 0% | 20% | 44% | 60% | 79% | 89% | | Very likely | 29% | 6% | 15% | 9% | 13% | 4% | | Quite likely | 47% | 28% | 26% | 24% | 6% | 5% | | Unlikely | 22% | 44% | 14% | 7% | 2% | 0% | | Don’t know | 2% | 2% | 1% | 0% | 0% | 2% |

There is some suggestion that emerging or fast growing markets are more attractive to innovative firms than their non-innovative counterparts. However, even amongst this latter group, two-thirds of firms are either already in one of these markets or believe they are very or quite likely to enter one in the next 2 years.

Table 11.1.5 Opportunities In Emerging & Fast Growing Markets (Summary) – By Innovation

| Innovative | Yes (alternative) | Yes | No | Yes | No | |------------|-------------------|-----|----|-----|----| | Base | 398 | 680 | 222| 224 | 655| | Already in | 55% | 53% | 35%| 59% | 44%| | Very likely| 11% | 10% | 9% | 12% | 9% | | Quite likely| 20% | 22% | 23%| 15% | 25%| | Unlikely | 14% | 15% | 31%| 13% | 21%| | Don’t know | 0% | 1% | 3% | 0% | 1% |

Firms with substantial growth objectives, and particularly innovative high growth firms, are more likely to already be operating in emerging or fast growing markets.

Table 11.1.6 Opportunities In Emerging & Fast Growing Markets (Summary) – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | Stay same | Innovative | | Moderate growth | Expect substantial growth | | Substantial growth| Other | | Non-innovative | | | Base | 108 | 204 | 476 | 222 | | Already in | 39% | 62% | 49% | 35% | | Very likely | 5% | 11% | 10% | 9% | | Quite likely | 23% | 14% | 25% | 23% | | Unlikely | 33% | 13% | 16% | 31% | | Don’t know | 1% | 1% | 1% | 3% | As might be expected, ‘born global’ firms are more likely to be in these markets than other young firms that internationalised at some point after they were established.

Table 11.1.7 Opportunities In Emerging & Fast Growing Markets (Summary) – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 255 | 136 | 44 | 126 | | Already in | 36% | 46% | 52% | 42% | | Very likely | 16% | 12% | 20% | 19% | | Quite likely | 27% | 24% | 18% | 24% | | Unlikely | 19% | 17% | 9% | 14% | | Don’t know | 2% | 1% | 0% | 1% |

As seen below, production sector firms are more likely to be operating in fast growing or emerging markets than those in the service sector. In both cases the likelihood of being in these markets increases with export experience, although this correlation is stronger for the production sector.

Table 11.1.8 Opportunities In Emerging & Fast Growing Markets (Summary) – By Sector & Experience

| | Production Sector | Services Sector | |------------------|-------------------|-----------------| | | Years Exporting | | Years Exporting | | | | Total | Less than 2 | 2-10 | Over 10 | Total | Less than 2 | 2-10 | Over 10 | | Base | 297 | 39 | 135 | 118 | 586 | 143 | 288 | 147 | | Already in | 56% | 23% | 49% | 69% | 45% | 29% | 46% | 51% | | Very likely | 7% | 16% | 6% | 7% | 11% | 18% | 9% | 12% | | Quite likely | 18% | 26% | 21% | 12% | 24% | 30% | 23% | 22% | | Unlikely | 18% | 35% | 22% | 12% | 19% | 20% | 22% | 14% | | Don’t know | 1% | 0% | 2% | 1% | 1% | 3% | 0% | 1% | 11.2 Influence of Economic Downturn

Firms were asked whether the economic downturn had prompted them to focus more attention on emerging or fast growing markets. The table below shows the proportion indicating that this was the case, at the total level and by UKTI usage.

Table 11.2.1 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By UKTI Usage

| | Total | UKTI Usage | |------------------|-------|------------| | | | UKTI User | Non-User | | Base | 902 | 235 | 667 | | Yes | 26% | 33% | 23% | | No | 74% | 67% | 77% | | Don't know | 0% | 0% | 1% |

Overall, a quarter of internationalising firms have responded to the poor economic climate by focussing more on emerging or fast growing markets, with this more likely to be the case amongst users of UKTI.

As seen below, larger firms with 50 or more employees are more likely to indicate that this is the case, and the same is true amongst older firms (although this difference is not large).

Table 11.2.2 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Yes | 21% | 26% | 27% | 24% | 22% | 38% | 29% | 45% | | No | 78% | 74% | 73% | 75% | 77% | 62% | 71% | 55% | | Don't know | 1% | 1% | 0% | 1% | 0% | 0% | 0% | 0% |

As well as being more likely to be already operating in fast growing markets, more experienced exporters (in terms of both time and number of markets) are also more inclined to have devoted more attention to these markets as a result of the downturn.

Table 11.2.3 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 185 | 433 | 270 | 411 | 214 | 268 | | Yes | 24% | 23% | 30% | 20% | 25% | 34% | | No | 75% | 76% | 70% | 79% | 75% | 65% | | Don't know | 0% | 1% | 0% | 0% | 0% | 1% | Innovative and IP active firms are more likely to have increased their focus on emerging and fast growing markets as a result of the recent economic conditions and, as seen previously, these firms were also more likely to already be operating in these markets.

Table 11.2.4 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Innovation

| | Innovative | IP Active | |----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Yes | 29% | 28% | 18% | 30% | 24% | | No | 70% | 72% | 81% | 70% | 75% | | Don't know | 0% | 0% | 1% | 0% | 0% |

Those firms that do not aspire to grow over the next 5 years are significantly less inclined to focus more on emerging and fast growing markets as a result of the downturn than those with growth ambitions.

Table 11.2.5 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Yes | 19% | 27% | 27% | 30% | 27% | 18% | | No | 80% | 72% | 73% | 69% | 73% | 81% | | Don't know | 1% | 0% | 1% | 1% | 0% | 1% |

Firms classified as being ‘born global’ by the standard definition and those judged to be ‘young, technology intensive’ are in fact no more likely to be devoting more attention to fast growing markets than other young firms. However, those defined as ‘born global’ via the alternative, tighter definition (whereby over 25% of their turnover has to come from overseas sales) are significantly more likely to be doing so than both other young firms and than older firms that have been established over 5 years.

Table 11.2.6 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 255 | 136 | 44 | 126 | 647 | 23% | 36% | 25% | | Yes | 21% | 23% | 36% | 25% | 27% | 23% | 36% | 25% | | No | 78% | 76% | 61% | 75% | 73% | 76% | 61% | 75% | | Don't know | 1% | 1% | 2% | 0% | 0% | 1% | 2% | 0% | There is no difference by sector in terms of the proportion of firms that have devoted more attention to emerging or fast growing markets as a result of the economic downturn.

Table 11.2.7 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Sector & Experience

| | Production Sector | Services Sector | |----------------------|-------------------|-----------------| | | Total | | | | Less than 2 | 2-10 | Over 10 | Total | Less than 2 | 2-10 | Over 10 | | Base | 297 | 39 | 135 | 118 | 586 | 143 | 288 | 147 | | Yes | 26% | 24% | 24% | 29% | 25% | 24% | 22% | 31% | | No | 74% | 76% | 76% | 71% | 74% | 76% | 77% | 69% | | Don't know | 0% | 0% | 0% | 0% | 1% | 1% | 1% | 0% | 12. Impact of Economic Downturn

12.1 Product & Service Development

Overall, two-thirds of firms (65%) indicated that they were involved in some form of product or service development activity. These firms were asked whether the economic downturn had affected either the amount spent on these activities or their geographical focus.

The table below shows these results, at the total level and by users and non-users of UKTI services. Please note that all analysis in this section of the report is based only on those firms that carry out or commission product or service development.

Table 12.1.1 Impact Of Downturn On Product/service Development – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base: All doing NPD | 585 | 183 | 402 | | Impact on Amount Spent on Product/Service Development | | | | | Spending more | 21% | 17% | 23% | | Spending less | 25% | 28% | 23% | | No impact | 53% | 55% | 52% | | Don't know | 1% | 1% | 2% | | Impact on Geographical Focus of Product/Service Development | | | | | More for overseas | 29% | 32% | 27% | | Less for overseas | 12% | 11% | 13% | | No change | 58% | 58% | 58% | | Don't know | 1% | 0% | 1% |

A quarter (25%) of those internationalising firms that undertake product or service development feel that the economic downturn has resulted in them spending less money on these activities. However, just over a fifth (21%) claim that the economic conditions have actually prompted them to invest more in product or service development.

There has also been considerable impact in terms of geographic focus, with 29% indicating that they have adjusted the balance of their product and service development activities and are now doing more for overseas customers than they were previously (with 12% now doing less for overseas customers).

Interestingly, UKTI users appear slightly less likely than non-users to have increased the product or service development spend as a result of the downturn, but slightly more likely to have adjusted the balance in favour of overseas markets. As seen below, there is no clear or consistent picture of the impact of the downturn on product and service development activity by either age or size of firm.

Table 12.1.2 Impact Of Downturn On Product/service Development – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|-----|-------|-------|---------|------| | Up to 5 | 160 | 144 | 281 | 330 | 152 | 41 | | 6-10 | | | | | | | | Over 10 | | | | | | | | Base: All doing NPD | | | | | | |

Impact on Amount Spent on Product/Service Development

| | Spending more | Spending less | No impact | Don't know | |----------------------|---------------|---------------|-----------|------------| | Spending more | 24% | 18% | 56% | 2% | | Spending less | 22% | 29% | 48% | 2% | | No impact | 19% | 25% | 55% | 1% | | Don't know | 15% | 23% | 52% | 1% |

Impact on Geographical Focus of Product/Service Development

| | More for overseas | Less for overseas | No change | Don't know | |----------------------|-------------------|-------------------|-----------|------------| | More for overseas | 31% | 8% | 60% | 1% | | Less for overseas | 26% | 13% | 60% | 1% | | No change | 30% | 13% | 56% | 1% | | Don't know | 28% | 13% | 57% | 1% |

There is also little difference by the various measures of overseas experience, although experienced exporters (e.g. operating in 10 or more markets) appear slightly less likely to be spending more on product and service development as a result of the downturn.

Table 12.1.3 Impact Of Downturn On Product/service Development – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base: All doing NPD | 113 | 277 | 187 | 234 | 137 | 208 | 231 | 99 | 83 | 139 |

Impact on Amount Spent on Product/Service Development

| | Spending more | Spending less | No impact | Don't know | |----------------------|---------------|---------------|-----------|------------| | Spending more | 21% | 24% | 52% | 1% | | Spending less | 23% | 25% | 50% | 2% | | No impact | 19% | 24% | 56% | 0% | | Don't know | 16% | 24% | 55% | 1% |

Impact on Geographical Focus of Product/Service Development

| | More for overseas | Less for overseas | No change | Don't know | |----------------------|-------------------|-------------------|-----------|------------| | More for overseas | 27% | 12% | 60% | 1% | | Less for overseas | 33% | 10% | 56% | 0% | | No change | 26% | 15% | 59% | 0% | | Don't know | 26% | 15% | 57% | 0% | Innovative firms are significantly more likely to have increased their spend on product and service development as a result of the economic climate, and are also more likely to be aiming more of this at overseas markets. However, there is no difference in this respect between firms that are IP active and those that are not.

Table 12.1.4 Impact Of Downturn On Product/service Development – By Innovation

| Base: All doing NPD | Innovative | IP Active | |---------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Spending more | 23% | 22% | 12% | 23% | 20% | | Spending less | 23% | 24% | 31% | 22% | 26% | | No impact | 52% | 53% | 53% | 53% | 54% | | Don't know | 1% | 1% | 4% | 2% | 1% |

Impact on Geographical Focus of Product/Service Development

| More for overseas | 31% | 30% | 19% | 31% | 28% | | Less for overseas | 14% | 12% | 15% | 9% | 14% | | No change | 54% | 57% | 65% | 58% | 58% | | Don't know | 1% | 1% | 2% | 2% | 0% |

In comparison to firms that merely aim to stay the same size, firms with growth ambitions are comparatively more likely to choose to spend more on product/service development as a result of the downturn, and to alter the balance of these activities in favour of overseas markets.

Table 12.1.5 Impact Of Downturn On Product/service Development – By Innovation & Growth

| Base: All doing NPD | Growth Objectives | Innovation & Growth | |---------------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Spending more | 15% | 20% | 23% | 24% | 21% | 12% | | Spending less | 30% | 25% | 21% | 21% | 25% | 31% | | No impact | 55% | 54% | 52% | 53% | 53% | 54% | | Don't know | 0% | 0% | 2% | 2% | 1% | 3% |

Impact on Geographical Focus of Product/Service Development

| More for overseas | 18% | 28% | 34% | 35% | 28% | 19% | | Less for overseas | 15% | 13% | 9% | 9% | 14% | 14% | | No change | 67% | 59% | 55% | 55% | 58% | 65% | | Don't know | 0% | 0% | 2% | 1% | 0% | 2% | There is little difference by whether firms were ‘born global’ or are classified as being ‘young, technology intensive’.

Table 12.1.6 Impact Of Downturn On Product/service Development – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base: All doing NPD | 160 | 85 | 32 | 95 | 425 |

Impact on Amount Spent on Product/Service Development

| | Spending more | Spending less | No impact | Don’t know | |----------------------|---------------|---------------|-----------|------------| | | 24% | 18% | 55% | 2% | | Born global | 24% | 24% | 51% | 2% | | Born global (alternative) | 26% | 21% | 53% | 5% | | Young, tech intensive | 26% | 18% | 53% | 2% |

Impact on Geographical Focus of Product/Service Development

| | More for overseas | Less for overseas | No change | Don’t know | |----------------------|-------------------|-------------------|-----------|------------| | | 30% | 8% | 59% | 1% | | Born global | 29% | 8% | 61% | 2% | | Born global (alternative) | 37% | 5% | 58% | 5% | | Young, tech intensive | 30% | 9% | 60% | 2% |

As seen below, service sector firms are slightly more likely to be spending more on innovation activities as a result of the downturn. However, there is no difference between service and production sector firms in terms of the impact on the geographic focus of these activities.

Table 12.1.7 Impact Of Downturn On Product/service Development – By Sector

| | Sector | |----------------------|--------| | | Production | Services | | Base: All doing NPD | 206 | 368 |

Impact on Amount Spent on Product/Service Development

| | Spending more | Spending less | No impact | Don’t know | |----------------------|---------------|---------------|-----------|------------| | | 17% | 24% | 58% | 1% | | Production | 23% | 24% | 52% | 1% |

Impact on Geographical Focus of Product/Service Development

| | More for overseas | Less for overseas | No change | Don’t know | |----------------------|-------------------|-------------------|-----------|------------| | | 29% | 13% | 57% | 1% | | Production | 29% | 11% | 60% | 1% | 12.2 Sterling Exchange Rates

All firms were asked to assess the overall impact of the recent decline in Sterling exchange rates on their business. As seen below, opinion is fairly evenly divided in this respect, with around a quarter reporting a net positive impact but a third reporting a negative impact.

Chart 12.2.1 Overall Impact Of Recent Decline in Sterling Exchange Rates

- Positive impact: 27%
- Negative impact: 35%
- No impact: 36%

Base: All respondents (Base, Don't know) (902, 2%)

Firms were also asked whether, if the Sterling exchange rates stayed at a similar level or fell further, this would prompt them to try and increase the share of their business accounted for by overseas sales. A significant proportion of internationalising firms (40%) felt that this would be the case.

Chart 12.2.2 Whether Will Try & Increase Share Of Business Accounted For By Overseas Sales If Sterling Stays At Similar Level Or Falls Further

- Yes: 40%
- No: 55%
- Don't know: 5%

Base: All respondents (Base) (902) As seen below, UKTI users are slightly more likely to indicate that the recent changes in Sterling exchange rates have had a positive impact on their business and are also more likely to feel that they will try and increase the share of their business accounted for by overseas sales if exchange rates stay at a similar level or fall further.

Table 12.2.1 Impact Of Sterling Exchange Rates – By UKTI Usage

| Impact of Recent Decline in Exchange Rates | Total | UKTI Usage | Non-User | |-------------------------------------------|-------|------------|----------| | Base | 902 | 235 | 667 | | Positive impact | 27% | 33% | 25% | | Negative impact | 35% | 34% | 36% | | No impact | 36% | 31% | 38% | | Don't know | 2% | 2% | 2% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| Whether Will Prompt to Increase Share of Business from Overseas Sales | Total | UKTI Usage | Non-User | |-----------------------------------------------------------------------|-------|------------|----------| | Yes | 40% | 47% | 37% | | No | 55% | 50% | 57% | | Don't know | 5% | 3% | 6% |

There is also some evidence that older firms are more likely to view the changes in exchange rates as a positive. However, there is no difference in this respect by size of firm.

Table 12.2.2 Impact Of Sterling Exchange Rates – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|---------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Impact of Recent Decline in Exchange Rates | | | | | | | | | | | Positive impact | | 23% | 22% | 30% | 25% | 27% | 39% | 26% | 26% | | Negative impact | | 39% | 40% | 32% | 38% | 33% | 33% | 30% | 27% | | No impact | | 37% | 35% | 36% | 35% | 39% | 24% | 38% | 47% | | Don't know | | 1% | 4% | 1% | 2% | 1% | 4% | 6% | 0% | | Whether Will Prompt to Increase Share of Business from Overseas Sales| | | | | | | | | | | Yes | | 42% | 39% | 39% | 41% | 36% | 43% | 49% | 27% | | No | | 54% | 53% | 56% | 54% | 58% | 47% | 47% | 64% | | Don't know | | 4% | 6% | 5% | 4% | 6% | 10% | 4% | 9% | There is a clear correlation between overseas experience and the impact of the recent fall in Sterling exchange rates, with those firms that have been exporting the longest, operate in the most markets and have the highest proportion of their turnover accounted for by overseas sales all more likely to report a positive impact.

Table 12.2.3 Impact Of Sterling Exchange Rates – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|------------------|--------------| | | Less than 2 years| 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 |

Impact of Recent Decline in Exchange Rates

| | Positive impact | Negative impact | No impact | Don't know | |----------------------|-----------------|-----------------|-----------|------------| | Impact of Recent Decline in Exchange Rates | 19% 26% 32% 22% 28% 33% 18% 34% 37% 37% 38% | 40% 34% 34% 35% 42% 31% 40% 37% 29% 28% | 41% 38% 32% 40% 29% 34% 41% 28% 29% 33% | 0% 2% 1% 2% 1% 2% 1% 1% 5% 0% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| | Yes | No | Don't know | |----------------------|-----|----|------------| | Impact of Recent Decline in Exchange Rates | 44% 37% 42% 36% 44% 42% 35% 45% 51% 44% | 51% 58% 53% 60% 50% 51% 61% 48% 46% 52% | 5% 5% 5% 4% 5% 7% 4% 7% 4% 3% |

Similarly, the more regions a firm is active in, the more likely they are to feel that the decline in exchange rates has had a beneficial effect on their business.

Table 12.2.4 Impact Of Sterling Exchange Rates – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |--------------------------------------|------|-----|-----|-------|------|------| | Base | 44 | 270 | 207 | 165 | 104 | 104 |

Impact of Recent Decline in Exchange Rates

| | Positive impact | Negative impact | No impact | Don't know | |----------------------|-----------------|-----------------|-----------|------------| | Impact of Recent Decline in Exchange Rates | 12% 24% 22% 33% 32% 35% | 47% 33% 41% 35% 34% 28% | 41% 40% 36% 31% 31% 36% | 0% 3% 2% 1% 3% 1% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| | Yes | No | Don't know | |----------------------|-----|----|------------| | Impact of Recent Decline in Exchange Rates | 38% 32% 43% 47% 40% 40% | 53% 63% 52% 48% 55% 52% | 8% 5% 5% 5% 5% 8% | Innovative firms and IP active firms are more likely to report a negative impact on their business from the decline in exchange rates (although they are also marginally more likely to report a positive impact as well). They are also more likely to claim that they will seek to increase the share of their business accounted for by overseas sales if the situation continues.

Table 12.2.5 Impact Of Sterling Exchange Rates – By Innovation

| Base | Innovative | IP Active | |------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | 398 | 680 | 222 | 224 | 655 |

Impact of Recent Decline in Exchange Rates

| Impact of Recent Decline in Exchange Rates | Yes | No | Don't know | |-------------------------------------------|-----|----|------------| | Positive impact | 27% | 25%| 2% | | Negative impact | 37% | 29%| 2% | | No impact | 34% | 44%| 2% | | Don't know | 2% | 2% | 1% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| Whether Will Prompt to Increase Share of Business from Overseas Sales | Yes | No | Don't know | |-----------------------------------------------------------------------|-----|----|------------| | Yes | 44% | 27%| 4% | | No | 51% | 66%| 5% | | Don't know | 4% | 6% | 4% |

Firms with growth aspirations are more likely to have been effected (either positively or negatively) by the fall in exchange rates than those who are just aiming to remain the same size in the next 5 years. Innovative high growth firms appear to have been particularly hit by this, with 40% reporting a net negative impact.

Table 12.2.6 Impact Of Sterling Exchange Rates – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 |

Impact of Recent Decline in Exchange Rates

| Impact of Recent Decline in Exchange Rates | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | |-------------------------------------------|-----------|-----------------|--------------------|--------------------------|-------|----------------| | Positive impact | 24% | 26% | 30% | 30% | 27% | 25% | | Negative impact | 25% | 35% | 38% | 40% | 36% | 29% | | No impact | 49% | 36% | 30% | 29% | 35% | 44% | | Don't know | 1% | 2% | 2% | 1% | 2% | 2% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| Whether Will Prompt to Increase Share of Business from Overseas Sales | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | |-----------------------------------------------------------------------|-----------|-----------------|--------------------|--------------------------|-------|----------------| | Yes | 24% | 41% | 47% | 50% | 41% | 27% | | No | 69% | 55% | 48% | 46% | 54% | 66% | | Don't know | 7% | 4% | 6% | 4% | 5% | 7% | Firms classified as being ‘born global’ under the alternative, tighter definition are more likely to report a positive impact of the falling exchange rates.

Table 12.2.7 Impact Of Sterling Exchange Rates – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 255 | 136 | 44 | 126 | 647 | | Impact of Recent Decline in Exchange Rates | | | | | | Positive impact | 23% | 24% | 32% | 21% | 28% | | Negative impact | 39% | 38% | 30% | 42% | 35% | | No impact | 37% | 38% | 39% | 36% | 36% | | Don’t know | 1% | 1% | 0% | 1% | 2% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| | Yes | No | |----------------------|-----|----| | Base | 513 | 386| | Impact of Recent Decline in Exchange Rates | | | | Positive impact | 28% | 26%| | Negative impact | 41% | 27%| | No impact | 30% | 44%| | Don’t know | 1% | 2% |

As might be expected, importers are more likely to report a negative impact on their business from the fall in Sterling exchange rates. However, over a quarter of this group still report a net positive impact, suggesting that the higher costs of purchasing from overseas are off-set by stronger sales.

Table 12.2.8 Impact Of Sterling Exchange Rates – By Whether Import

| | Importer | |----------------------|----------| | | Yes | No | | Base | 513 | 386 | | Impact of Recent Decline in Exchange Rates | | | | Positive impact | 28% | 26% | | Negative impact | 41% | 27% | | No impact | 30% | 44% | | Don’t know | 1% | 2% |

Whether Will Prompt to Increase Share of Business from Overseas Sales

| | Yes | No | |----------------------|-----|----| | | 44% | 33%| | | 51% | 61%| | | 5% | 5% | As seen below, the decline in Sterling exchange rates appears to have hit service sector firms the hardest, with approaching two-fifths of this group pointing to a negative net impact (compared to just under a third of production sector firms).

Table 12.2.9 Impact Of Sterling Exchange Rates – By Sector

| Sector | Production | Services | |--------|------------|----------| | Base | 297 | 586 | | Impact of Recent Decline in Exchange Rates | | | | Positive impact | 30% | 25% | | Negative impact | 31% | 38% | | No impact | 38% | 35% | | Don’t know | 1% | 2% | | Whether Will Prompt to Increase Share of Business from Overseas Sales | | | | Yes | 43% | 37% | | No | 52% | 57% | | Don’t know | 5% | 6% | 12.3 Access to Finance

All firms were asked whether they had experienced any difficulties in accessing finance over the past 6 months and, if so, whether this had a negative impact on either the scale or scope of their overseas activities or the scale or scope of their product or service development activity.

Chart 12.3.1 Whether Difficulties Accessing Finance In Last 6 Months

- Yes: 15%
- Negative impact on scale or scope of overseas activities: 9%
- Negative impact on scale or scope of product/service development activity: 10%
- No: 83%

Base: All respondents (Base, Don’t know/Refused) (902, 2%)

Relatively few internationalising firms (15%) have experienced any difficulties accessing finance in the last 6 months, although it is not clear what proportion of firms have actually sought finance in this period.

In most cases where firms have had difficulties accessing finance this has impacted on both their overseas activities and their product or service development. As seen below, UKTI users appear to be slightly more likely to have experienced problems accessing finance, although this difference is not statistically significant. They are also more likely to indicate that this has impacted on the scale or scope of their overseas activities and their product or service development activity.

Table 12.3.1 Whether Difficulties Accessing Finance In Last 6 Months – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |------------|-------|-----------|----------| | Base | 902 | 235 | 667 | | Yes | 15% | 18% | 14% | | - Negative impact on overseas activities | 9% | 13% | 8% | | - Negative impact on product/service dev’t | 10% | 13% | 9% | | No | 83% | 81% | 84% | | Don’t know/refused | 2% | 1% | 2% |

There are no major differences in this respect by age or size of firm, although there is some suggestion that firms established less than 10 years and those with under 50 employees are more likely to have had difficulties obtaining finance.

Table 12.3.2 Whether Difficulties Accessing Finance In Last 6 Months – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|---------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Yes | | 17% | 21% | 12% | 16% | 16% | 13% | 2% | 9% | | - Negative impact on overseas activities | 12% | 12% | 8% | 11% | 9% | 9% | 2% | 6% | | - Negative impact on product/service dev’t | 13% | 12% | 8% | 12% | 10% | 7% | 2% | 3% | | No | | 82% | 78% | 86% | 83% | 82% | 79% | 95% | 91% | | Don’t know/refused | | 1% | 2% | 2% | 1% | 2% | 8% | 3% | 0% | There is also little relationship between overseas experience and the likelihood of having difficulties raising finance.

Table 12.3.3 Whether Difficulties Accessing Finance In Last 6 Months – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 | | Yes | 17% | 17% | 12% | 15% | 16% | 15% | 15% | 16% | 18% | 16% | | - Negative impact on overseas activities | 10% | 10% | 8% | 9% | 9% | 10% | 8% | 10% | 12% | 13% | | - Negative impact on product/service dev't | 8% | 12% | 9% | 9% | 11% | 10% | 9% | 11% | 10% | 14% | | No | 83% | 82% | 86% | 84% | 83% | 83% | 84% | 82% | 81% | 82% | | Don't know/refused | 0% | 1% | 2% | 1% | 1% | 2% | 1% | 1% | 1% | 1% |

However, innovative firms are clearly more likely to have problems accessing finance than their non-innovative counterparts.

Table 12.3.4 Whether Difficulties Accessing Finance In Last 6 Months – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Yes | 19% | 17% | 8% | 17% | 15% | | - Negative impact on overseas activities | 14% | 11% | 4% | 11% | 9% | | - Negative impact on product/service dev't | 14% | 12% | 5% | 10% | 10% | | No | 79% | 81% | 90% | 81% | 84% | | Don't know/refused | 2% | 1% | 2% | 2% | 1% | Interestingly, firms with substantial growth aspirations are most likely to experience difficulties accessing finance, suggesting that this could potentially be a barrier to the realisation of this growth.

Table 12.3.5 Whether Difficulties Accessing Finance In Last 6 Months – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Yes | 12% | 13% | 21% | 23% | 15% | 8% | | - Negative impact on overseas activities | 9% | 7% | 16% | 18% | 9% | 4% | | - Negative impact on product/service dev't | 8% | 8% | 15% | 16% | 10% | 5% | | No | 88% | 85% | 77% | 75% | 84% | 90% | | Don't know/refused | 1% | 1% | 2% | 1% | 1% | 2% | 12.4 Export Credit Insurance

Firms were also asked whether they ever used export credit insurance and, if so, whether they had experienced any difficulties in accessing this over the past 6 months.

Chart 12.4.1 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months

Only 2% of internationalising firms have had any difficulties accessing export credit insurance over the past 6 months. However, only 11% actually use this type of insurance, and this therefore means that almost 1 in 5 firms that use export credit insurance have experienced problems accessing it.

As seen below, UKTI users are both more likely to use export credit insurance and more likely to have had difficulty accessing it.

Table 12.4.1 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months – By UKTI Usage

| UKTI Usage | Total | UKTI User | Non-User | |------------|-------|-----------|----------| | Base | 902 | 235 | 667 | | Yes | 2% | 5% | 1% | | No | 9% | 13% | 7% | | Do not use it | 80% | 75% | 82% | | Don't know | 6% | 4% | 6% | | Not yet exporting | 4% | 3% | 4% | Larger firms are more likely to be using export credit insurance and are correspondingly more likely to have experienced difficulties obtaining it. However, there is no difference in this respect by age of firm.

Table 12.4.2 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Yes | No | Do not use it | Don’t know | Not yet exporting | |---------------------|-----------------------------|-----|----|---------------|------------|------------------| | Up to 5 | 255 | 2% | 5% | 81% | 2% | 11% | | 6-10 | 219 | 3% | 8% | 81% | 4% | 4% | | Over 10 | 428 | 2% | 10%| 79% | 7% | 2% | | 0-9 | 545 | 1% | 5% | 88% | 1% | 6% | | 10-49 | 222 | 4% | 12%| 76% | 7% | 6% | | 50-99 | 53 | 2% | 12%| 65% | 16% | 4% | | 100-249 | 28 | 6% | 15%| 53% | 24% | 24% | | 250+ | 35 | 6% | 22%| 49% | | |

As might be expected, usage of export credit insurance increases with overseas experience. Experienced firms are also more likely to report difficulties accessing the insurance.

Table 12.4.3 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | Less than 2 years | 185 | 1% | | 2-10 years | 433 | 2% | | Over 10 years | 270 | 3% | | Up to 5 | 411 | 1% | | 6-10 | 214 | 2% | | More than 10 | 268 | 4% | | Up to 10% | 424 | 1% | | 11 - 25% | 133 | 4% | | 26 - 50% | 119 | 2% | | Over 50% | 170 | 4% |

Whilst innovative firms are clearly more likely to use export credit insurance than their non-innovative counterparts, it is still the case that only 3% of innovative firms have experienced difficulties obtaining it.

Table 12.4.4 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months – By Innovation

| Innovative | Yes (alternative) | Yes | No | Yes | No | |------------|-------------------|-----|----|-----|----| | Base | 398 | 680 | 222| 224 | 655| | Yes | 3% | 3% | 0% | 4% | 2% | | No | 13% | 11% | 2% | 15% | 6% | | Do not use it | 77% | 77% | 88%| 71% | 84%| | Don’t know | 3% | 6% | 5% | 5% | 4% | | Not yet exporting | 4% | 4% | 5% | 5% | 4% | Firms planning substantial growth appear marginally more likely to be using export credit insurance, although there is no difference in the proportion experiencing difficulties accessing it.

Table 12.4.5 Whether Difficulties Accessing Export Credit Insurance In Last 6 Months – By Innovation & Growth

| Innovation & Growth | Growth Objectives | | |---------------------|-------------------|---| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Yes | 2% | 2% | 2% | 3% | 3% | 0% | | No | 7% | 8% | 12% | 13% | 10% | 2% | | Do not use it | 90% | 80% | 75% | 73% | 78% | 88% | | Don't know | 2% | 5% | 7% | 4% | 6% | 5% | | Not yet exporting | 0% | 5% | 4% | 4% | 3% | 5% | 13. Marketing Channels

13.1 Channels Used

All respondents were read out a list of media/communication channels and asked to indicate which ones they personally used to obtain news or information that was relevant to their business. As well as the various media channels, respondents were also asked whether they had attended any seminars, tradeshows or conferences in the past year. The chart below summarises the penetration levels for each of these channels.

Chart 13.1.1 Proportion Using Each Channel For Business News/Information

- Websites: 82%
- Trade press: 72%
- Magazines: 49%
- National newspapers: 37%
- Social networking sites: 28%
- TV: 24%
- National radio: 18%
- Local newspapers: 16%
- Local radio: 10%
- Attended seminars, tradeshows or conferences in last year: 68%

Base: All respondents (Base, Don't know) (902, 0%)

Websites and the trade press are the most widely used channels for business news and information, and the majority of respondents had also attended seminars, tradeshows or conferences in the past year.

Although less widespread, half of all respondents indicated that they obtained news or information relevant to their business from magazines and over a third from national newspapers. Social networking sites were also used for business purposes by over a quarter of respondents. There is some evidence that young firms and those with less than 10 staff are more likely to use social networking sites for business news or information, but older and larger firms are comparatively more likely to use the trade press.

Table 13.1.1 Proportion Using Each Channel For Business News/Information – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Websites | | 86% | 81% | 80% | 84% | 77% | 80% | 83% | 78% | | Trade press | | 65% | 70% | 74% | 67% | 73% | 81% | 94% | 91% | | Magazines | | 49% | 53% | 47% | 50% | 47% | 47% | 52% | 55% | | National newspapers | | 33% | 42% | 36% | 36% | 32% | 40% | 56% | 63% | | Social networking | | 43% | 37% | 20% | 31% | 23% | 25% | 26% | 22% | | TV | | 25% | 26% | 23% | 24% | 18% | 35% | 45% | 23% | | National radio | | 19% | 18% | 18% | 18% | 13% | 26% | 38% | 17% | | Local newspapers | | 19% | 17% | 15% | 14% | 14% | 22% | 30% | 29% | | Local radio | | 13% | 9% | 9% | 9% | 7% | 14% | 22% | 14% | | Seminars, etc | | 73% | 66% | 67% | 65% | 71% | 73% | 75% | 67% | | (None of these) | | 4% | 7% | 8% | 7% | 9% | 8% | 4% | 3% | | (Don't know) | | 0% | 0% | 1% | 0% | 2% | 0% | 0% | 0% |

There are no clear or consistent differences in the media channels used by the various measures of overseas experience.

Table 13.1.2 Proportion Using Each Channel For Business News/Information – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 | | Websites | 85% | 83% | 79% | 82% | 79% | 84% | 81% | 82% | 90% | 79% | | Trade press | 66% | 69% | 76% | 68% | 67% | 80% | 69% | 72% | 83% | 72% | | Magazines | 48% | 49% | 49% | 48% | 41% | 57% | 46% | 55% | 55% | 48% | | National newspapers | 34% | 36% | 39% | 34% | 31% | 45% | 35% | 38% | 40% | 40% | | Social networking | 33% | 31% | 22% | 27% | 26% | 30% | 25% | 28% | 33% | 29% | | TV | 24% | 25% | 23% | 22% | 21% | 28% | 23% | 26% | 26% | 22% | | National radio | 18% | 19% | 16% | 17% | 17% | 19% | 18% | 23% | 14% | 17% | | Local newspapers | 20% | 16% | 14% | 16% | 12% | 18% | 16% | 21% | 14% | 13% | | Local radio | 11% | 9% | 10% | 9% | 7% | 12% | 10% | 13% | 9% | 8% | | Seminars, etc | 66% | 69% | 67% | 64% | 70% | 71% | 64% | 71% | 68% | 77% | | (None of these) | 8% | 7% | 7% | 8% | 10% | 4% | 9% | 5% | 2% | 7% | | (Don't know) | 0% | 0% | 1% | 0% | 0% | 1% | 0% | 0% | 0% | 0% | Each of the media channels is more likely to be used by innovative firms than their non-innovative counterparts, suggesting that the former draw on a much broader range of sources to find information or news that is relevant to their business. This difference is particularly evident when it comes to usage of the trade press, usage of magazines and attendance at seminars, tradeshows and conferences.

Table 13.1.3 Proportion Using Each Channel For Business News/Information – By Innovation

| Channel | Innovative | IP Active | |--------------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Websites | 86% | 84% | 74% | 84% | 81% | | Trade press | 77% | 77% | 56% | 80% | 69% | | Magazines | 55% | 54% | 33% | 57% | 46% | | National newspapers | 40% | 40% | 28% | 43% | 35% | | Social networking | 32% | 30% | 22% | 29% | 28% | | TV | 26% | 27% | 15% | 29% | 22% | | National radio | 22% | 20% | 10% | 25% | 16% | | Local newspapers | 20% | 18% | 9% | 22% | 14% | | Local radio | 11% | 11% | 5% | 12% | 9% | | Seminars, etc | 80% | 74% | 49% | 80% | 64% | | (None of these) | 3% | 4% | 18% | 4% | 8% | | (Don't know) | 0% | 0% | 1% | 0% | 0% |

Generally, firms that are planning to grow (either moderately or substantially) tend to use a wider range of information sources, and this is particularly true of innovative high growth firms.

Table 13.1.4 Proportion Using Each Channel For Business News/Information – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Websites | 74% | 82% | 87% | 87% | 83% | 74% | | Trade press | 65% | 73% | 75% | 78% | 76% | 56% | | Magazines | 39% | 50% | 51% | 54% | 54% | 33% | | National newspapers | 32% | 38% | 41% | 43% | 38% | 28% | | Social networking | 21% | 28% | 33% | 33% | 28% | 22% | | TV | 20% | 25% | 25% | 27% | 26% | 15% | | National radio | 13% | 18% | 20% | 22% | 20% | 10% | | Local newspapers | 9% | 18% | 18% | 20% | 18% | 9% | | Local radio | 5% | 11% | 11% | 12% | 11% | 5% | | Seminars, etc | 54% | 68% | 79% | 82% | 71% | 49% | | (None of these) | 14% | 7% | 4% | 4% | 4% | 18% | | (Don't know) | 1% | 0% | 1% | 1% | 0% | 1% | 13.2 Usefulness

For each media channel used, respondents were asked to rate its usefulness as a source of news or information that is relevant to their business, using a 1-5 scale where 1 meant it was ‘not at all useful’ and 5 meant it was ‘extremely useful’. The chart below summarises these results, showing the proportion of respondents rating each source as ‘useful’ (i.e. 4-5 out of 5). Please note that this analysis is based just on those using each channel.

Chart 13.2.1 Usefulness As A Source Of Business News/Information

| Channel | Proportion | |--------------------------------|------------| | Websites | 70% | | Trade press | 53% | | Magazines | 39% | | National newspapers | 25% | | Social networking sites | 45% | | TV | 22% | | National radio | 23% | | Local newspapers | 20% | | Local radio | 17% | | Seminars, tradeshows or conferences | 63% |

Base: All using channel (Base) (742, 636, 443, 331, 276, 218, 162, 149, 91, 616)

Broadly speaking, the perceived usefulness of the various channels reflects the usage patterns, with those channels that are most widely used also being rated as most useful. For example, websites, trade press and seminars/conferences were the most widely used sources of business information or news, and were also rated as the most useful.

The one exception to this is social networking sites, which were used for business purposes by only 28% of respondents but were rated as being useful by 45% of users. As seen below, there are no consistent or significant differences in the perceived usefulness of the various channels by either age or size of firm.

Table 13.2.1 Usefulness As A Source Of Business News/Information – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Websites | Trade press | Magazines | National newspapers | Social networking | TV | National radio | Local newspapers | Local radio | Seminars, etc | |---------------------|---------------------------|----------|-------------|-----------|---------------------|------------------|----|---------------|-----------------|-------------|--------------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | | | | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | | | | Websites | 74% | 74% | 67% | 72% | 67% | 68% | 59% | 66% | | | | | Trade press | 58% | 55% | 51% | 54% | 48% | 63% | 70% | 40% | | | | | Magazines | 37% | 43% | 37% | 40% | 38% | 38% | 37% | 30% | | | | | National newspapers | 33% | 22% | 24% | 27% | 22% | 26% | 41% | 5% | | | | | Social networking | 52% | 40% | 45% | 47% | 50% | 8% | 44% | 46% | | | | | TV | 22% | 29% | 20% | 23% | 21% | 26% | 25% | 0% | | | | | National radio | 27% | 26% | 21% | 27% | 21% | 19% | 20% | 0% | | | | | Local newspapers | 24% | 16% | 21% | 25% | 11% | 14% | 26% | 10% | | | | | Local radio | 19% | 16% | 18% | 19% | 11% | 35% | 0% | 21% | | | | | Seminars, etc | 67% | 62% | 62% | 65% | 63% | 66% | 50% | 46% | | | |

There is also no evidence of any major differences in the usefulness of each channel by overseas experience.

Table 13.2.2 Usefulness As A Source Of Business News/Information – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 | | Websites | 74% | 71% | 67% | 72% | 63% | 71% | 69% | 74% | 73% | 65% | | Trade press | 52% | 57% | 50% | 52% | 55% | 53% | 55% | 54% | 54% | 50% | | Magazines | 34% | 41% | 38% | 35% | 40% | 42% | 36% | 42% | 30% | 47% | | National newspapers | 36% | 23% | 23% | 25% | 22% | 27% | 28% | 20% | 23% | 19% | | Social networking | 43% | 49% | 42% | 47% | 41% | 46% | 40% | 48% | 56% | 44% | | TV | 16% | 25% | 21% | 22% | 23% | 23% | 21% | 23% | 21% | 21% | | National radio | 26% | 18% | 29% | 21% | 25% | 25% | 26% | 18% | 34% | 21% | | Local newspapers | 23% | 18% | 23% | 21% | 11% | 26% | 17% | 25% | 17% | 31% | | Local radio | 26% | 10% | 19% | 25% | 4% | 17% | 15% | 19% | 40% | 9% | | Seminars, etc | 70% | 60% | 62% | 61% | 60% | 66% | 59% | 61% | 68% | 64% | For innovative and non-innovative firms alike, the most useful sources of business information and news are websites, the trade press and attending seminars, tradeshows and conferences.

Table 13.2.3 Usefulness As A Source Of Business News/Information – By Innovation

| Source | Innovative | IP Active | |-------------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Websites | 70% | 69% | 72% | 65% | 72% | | Trade press | 57% | 53% | 51% | 57% | 52% | | Magazines | 42% | 39% | 35% | 42% | 37% | | National newspapers | 28% | 26% | 21% | 28% | 24% | | Social networking | 46% | 45% | 47% | 39% | 48% | | TV | 25% | 24% | 13% | 30% | 20% | | National radio | 23% | 24% | 16% | 25% | 24% | | Local newspapers | 21% | 17% | 40% | 20% | 21% | | Local radio | 22% | 15% | 32% | 17% | 18% | | Seminars, etc | 66% | 63% | 59% | 68% | 60% |

There is some indication that firms with growth aspirations view the trade press, national newspapers and the radio as more useful sources of relevant business news and information.

Table 13.2.4 Usefulness As A Source Of Business News/Information – By Innovation & Growth

| Source | Growth Objectives | Innovation & Growth | |-------------------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Websites | 70% | 69% | 73% | 71% | 69% | 72% | | Trade press | 43% | 51% | 62% | 62% | 50% | 51% | | Magazines | 36% | 37% | 41% | 44% | 37% | 35% | | National newspapers | 16% | 27% | 25% | 26% | 25% | 21% | | Social networking | 59% | 42% | 47% | 48% | 43% | 47% | | TV | 17% | 25% | 19% | 20% | 26% | 13% | | National radio | 4% | 29% | 19% | 21% | 26% | 16% | | Local newspapers | 20% | 23% | 14% | 11% | 20% | 40% | | Local radio | 0% | 22% | 9% | 7% | 19% | 32% | | Seminars, etc | 57% | 63% | 65% | 65% | 62% | 59% | 13.3 Marketing UKTI Services

All respondents were asked what they thought would be the best way for UKTI to let them know about a new service they were providing. The chart below summarises these results.

Chart 13.3.1 Best Way For UKTI To Communicate A New Service

| Medium | Percentage | |---------------------------------|------------| | Websites | 28% | | Trade press | 24% | | Email | 13% | | Direct mail | 6% | | National newspapers | 5% | | Seminars, tradeshows or conferences | 4% | | TV | 4% | | Magazines | 3% | | Social networking sites | 3% | | National radio | 1% | | Telephone | 1% | | Local newspapers | 1% | | Local radio | 1% | | Other | 1% |

Base: All respondents (Base, Don't know/None) (902, 7%)

Whilst a wide range of mediums were mentioned, websites and the trade press were felt to be the most effective marketing channels for UKTI to use by some distance. This is consistent with the fact that these are the most widely used channels and are also perceived to be the most useful as a source of business information or news.

Whilst a significant minority of respondents mentioned email, this is clearly only feasible where UKTI already have someone in the firm’s email address and hence is likely to only be an effective route to communicating with existing clients.(^7)

(^7) Please note that email was not included in the prompt list at this question and respondents were asked to assume that UKTI didn’t already have their contact details. However, a minority still gave answers such as ‘email’ or ‘telephone’. As seen below, younger and smaller firms are more likely to see websites as the most effective channel for UKTI to use, whereas older and larger firms are comparatively more likely to suggest the trade press.

Table 13.3.1 Best Way For UKTI To Communicate A New Service – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Websites | Trade press | Email | Direct mail | National newspaper | Seminars, etc | TV | Magazines | Social networking | National radio | Telephone | Local newspaper | Local radio | Other | Don’t know/None | |---------------------|-----------------------------|----------|-------------|-------|-------------|-------------------|---------------|----|-----------|------------------|---------------|-----------|----------------|------------|------|----------------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | | | | | | | | | | Base | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | | | | | | | | | Websites | 35% | 27% | 27% | 33% | 21% | 21% | 15% | 36%| | | | | | | | | | Trade press | 18% | 19% | 27% | 18% | 28% | 27% | 49% | 36%| | | | | | | | | | Email | 11% | 15% | 13% | 13% | 16% | 9% | 12% | 9% | | | | | | | | | | Direct mail | 6% | 10% | 4% | 6% | 6% | 8% | 3% | 0% | | | | | | | | | | National newspaper | 5% | 7% | 5% | 5% | 7% | 8% | 8% | 0% | | | | | | | | | | Seminars, etc | 3% | 3% | 4% | 4% | 4% | 4% | 0% | 4% | | | | | | | | | | TV | 2% | 4% | 4% | 3% | 5% | 6% | 2% | 0% | | | | | | | | | | Magazines | 2% | 5% | 3% | 4% | 2% | 4% | 4% | 3% | | | | | | | | | | Social networking | 5% | 3% | 2% | 3% | 3% | 2% | 0% | 0% | | | | | | | | | | National radio | 0% | 0% | 2% | 1% | 0% | 2% | 4% | 0% | | | | | | | | | | Telephone | 1% | 1% | 0% | 1% | 1% | 1% | 0% | 0% | | | | | | | | | | Local newspaper | 1% | 1% | 0% | 1% | 1% | 1% | 0% | 0% | | | | | | | | | | Local radio | 2% | 0% | 0% | 1% | 1% | 0% | 4% | 0% | | | | | | | | | | Other | 1% | 1% | 1% | 1% | 1% | 2% | 0% | 0% | | | | | | | | | | Don’t know/None | 9% | 7% | 5% | 7% | 6% | 4% | 7% | 0% | | | | | | | | |

There is also some indication that the trade press is more effective for communicating with experienced firms than with less advanced exporters.

Table 13.3.1 Best Way For UKTI To Communicate A New Service – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 | | Websites | 33% | 28% | 26% | 29% | 28% | 28% | 25% | 32% | 23% | 34% | | Trade press | 15% | 20% | 30% | 20% | 26% | 27% | 25% | 19% | 30% | 21% | | Email | 12% | 15% | 11% | 13% | 10% | 14% | 10% | 11% | 20% | 13% | | Direct mail | 6% | 6% | 5% | 7% | 5% | 5% | 6% | 5% | 5% | 5% | | National newspaper | 6% | 5% | 6% | 6% | 4% | 6% | 5% | 3% | 6% | 10% | | Seminars, etc | 3% | 6% | 2% | 4% | 7% | 1% | 5% | 5% | 1% | 1% | | TV | 2% | 4% | 4% | 3% | 5% | 4% | 3% | 7% | 3% | 2% | | Magazines | 4% | 3% | 4% | 3% | 4% | 4% | 5% | 4% | 1% | 1% | | Social networking | 4% | 3% | 3% | 3% | 3% | 3% | 3% | 3% | 4% | 2% | | National radio | 0% | 0% | 2% | 1% | 1% | 2% | 1% | 0% | 1% | 2% | | Telephone | 0% | 1% | 1% | 0% | 1% | 1% | 0% | 2% | 0% | 1% | | Local newspaper | 1% | 1% | 0% | 1% | 0% | 0% | 1% | 0% | 0% | 1% | | Local radio | 1% | 0% | 0% | 1% | 0% | 1% | 1% | 0% | 0% | 0% | | Other | 1% | 1% | 1% | 1% | 1% | 2% | 1% | 1% | 2% | 0% | | Don’t know/None | 9% | 7% | 5% | 7% | 6% | 4% | 7% | 7% | 4% | 5% | As seen in the tables below, there is little difference by innovation or growth objectives in terms of firms’ views on the best marketing channels for UKTI to use.

Table 13.3.1 Best Way For UKTI To Communicate A New Service – By Innovation

| | Innovative | IP Active | |----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | **Base** | 398 | 680 | 222 | 224 | 655 | | Websites | 27% | 27% | 32% | 29% | 28% | | Trade press | 23% | 23% | 26% | 26% | 22% | | Email | 12% | 14% | 11% | 11% | 14% | | Direct mail | 6% | 6% | 6% | 4% | 6% | | National newspaper | 7% | 6% | 4% | 5% | 6% | | Seminars, etc | 6% | 5% | 2% | 4% | 4% | | TV | 4% | 4% | 2% | 4% | 3% | | Magazines | 2% | 4% | 3% | 4% | 3% | | Social networking | 3% | 3% | 2% | 2% | 3% | | National radio | 2% | 2% | 0% | 2% | 1% | | Telephone | 1% | 1% | 1% | 1% | 1% | | Local newspaper| 1% | 1% | 1% | 1% | 1% | | Local radio | 0% | 1% | 1% | 0% | 1% | | Other | 1% | 1% | 1% | 1% | 1% | | Don’t know/None| 6% | 6% | 9% | 7% | 7% |

Table 13.3.1 Best Way For UKTI To Communicate A New Service – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | **Base** | 108 | 510 | 248 | 204 | 476 | 222 | | Websites | 28% | 28% | 28% | 26% | 27% | 32% | | Trade press | 23% | 27% | 18% | 18% | 25% | 26% | | Email | 13% | 12% | 17% | 19% | 12% | 11% | | Direct mail | 6% | 5% | 6% | 6% | 6% | 6% | | National newspaper | 6% | 5% | 7% | 7% | 5% | 4% | | Seminars, etc | 1% | 4% | 6% | 6% | 4% | 2% | | TV | 5% | 3% | 4% | 5% | 4% | 2% | | Magazines | 4% | 3% | 4% | 4% | 3% | 3% | | Social networking | 2% | 3% | 3% | 2% | 3% | 2% | | National radio | 0% | 2% | 1% | 1% | 2% | 0% | | Telephone | 0% | 1% | 0% | 0% | 1% | 1% | | Local newspaper| 0% | 1% | 1% | 1% | 1% | 1% | | Local radio | 2% | 0% | 0% | 0% | 1% | 1% | | Other | 0% | 1% | 1% | 1% | 1% | 1% | | Don’t know/None| 10% | 6% | 4% | 4% | 6% | 9% | 13.4 Social Networking Sites

As seen previously, 28% of respondents indicated that they currently used social networking sites as a source of business information or news. Those that did not already use these sites for business purposes were asked whether they expected to do so in the next year.

Chart 13.4.1 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year

In addition to the 28% of respondents that already use social networking sites for business purposes, a further 14% plan to start doing so in the next year.

As seen below, younger and smaller firms are more likely to be currently using social networking sites and more likely to start doing so in the next year.

Table 13.4.1 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base | | 255 | 219 | 428 | 545 | 222 | 53 | 28 | 35 | | Yes | | 19% | 13% | 13% | 15% | 15% | 9% | 8% | 12% | | No | | 37% | 47% | 66% | 54% | 58% | 66% | 66% | 61% | | Don't know | | 1% | 4% | 1% | 1% | 4% | 0% | 0% | 5% | | Already use them | | 43% | 37% | 20% | 31% | 23% | 25% | 26% | 22% | There are no consistent differences in this respect by the various measures of overseas experience.

Table 13.4.2 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|--------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | Up to 10% | 11 - 25% | 26 - 50% | Over 50% | | Base | 185 | 433 | 270 | 411 | 214 | 268 | 424 | 133 | 119 | 170 | | Yes | 20% | 15% | 10% | 16% | 12% | 13% | 15% | 14% | 13% | 13% | | No | 45% | 51% | 67% | 55% | 61% | 55% | 58% | 55% | 53% | 58% | | Don't know | 2% | 2% | 1% | 2% | 1% | 2% | 2% | 3% | 0% | 0% | | Already use them| 33% | 31% | 22% | 27% | 26% | 30% | 25% | 28% | 33% | 29% |

It appears that innovative firms have a greater appetite for social networking sites, with almost half using them already or planning to do so in the next year, compared to less than a third of non-innovative firms.

Table 13.4.3 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 398 | 680 | 222 | 224 | 655 | | Yes | 14% | 16% | 9% | 14% | 14% | | No | 52% | 53% | 68% | 56% | 57% | | Don't know | 2% | 2% | 1% | 1% | 1% | | Already use them | 32% | 30% | 22% | 29% | 28% |

Broadly speaking, the more ambitious a firm’s growth objectives are, the more likely they are to be using or planning to use social networking sites for business purposes.

Table 13.4.4 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Innovative | Non-innovative | | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 108 | 510 | 248 | 204 | 476 | 222 | | Yes | 14% | 12% | 18% | 19% | 14% | 9% | | No | 64% | 59% | 46% | 45% | 56% | 68% | | Don't know | 1% | 2% | 2% | 2% | 2% | 1% | | Already use them | 21% | 28% | 33% | 33% | 28% | 22% | Annex A – Markets Selected (For Drivers & Barriers Questions)

For the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’

The table below gives details of the market selected by users and non-users of UKTI.

Table A.1 Market Selected – By UKTI Usage

| Country | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 902 | 235 | 667 | | USA | 11% | 14% | 10% | | France | 7% | 4% | 8% | | China | 6% | 7% | 6% | | Germany | 6% | 5% | 6% | | India | 5% | 8% | 4% | | Ireland (Republic) | 4% | 2% | 5% | | Italy | 4% | 2% | 4% | | Russia | 4% | 8% | 2% | | Nigeria | 3% | 3% | 2% | | UAE | 3% | 3% | 2% | | Australia | 2% | 2% | 2% | | Dubai | 2% | 0% | 3% | | Holland | 2% | 1% | 3% | | Japan | 2% | 5% | 2% | | Saudi Arabia | 2% | 3% | 1% | | Spain | 2% | 1% | 2% | | Belgium | 1% | 1% | 1% | | Brazil | 1% | 2% | 0% | | Canada | 1% | 0% | 1% | | Denmark | 1% | 1% | 1% | | Egypt | 1% | 1% | 1% | | Greece | 1% | 1% | 1% | | Hong Kong | 1% | 0% | 1% | | Iran | 1% | 1% | 0% | | Israel | 1% | 0% | 1% | | Korea (South) | 1% | 1% | 1% | | Kuwait | 1% | 1% | 1% | | Libya | 1% | 2% | 0% | | Country | 1% | 0% | 1% | |-------------------------|----|----|----| | Malta | 1% | 0% | 1% | | Middle East (unspecified)| 1% | 1% | 1% | | Norway | 1% | 1% | 1% | | Pakistan | 1% | 0% | 1% | | Poland | 1% | 1% | 2% | | Portugal | 1% | 0% | 1% | | Romania | 1% | 1% | 1% | | Singapore | 1% | 2% | 1% | | South Africa | 1% | 1% | 1% | | Sweden | 1% | 1% | 1% | | Switzerland | 1% | 1% | 1% | | Turkey | 1% | 1% | 1% | | Afghanistan | 0% | 1% | 0% | | Africa (unspecified) | 0% | 1% | 0% | | Algeria | 0% | 1% | 0% | | Angola | 0% | 1% | 0% | | Ghana | 0% | 1% | 0% | | Malaysia | 0% | 0% | 1% | | Mexico | 0% | 1% | 0% | | Ukraine | 0% | 0% | 1% | | Vietnam | 0% | 1% | 0% | Annex B – Questionnaire TARGET QUOTAS:

- 300 interviews with firms 0-5 years old
- 300 interviews with firms 6-10 years old
- 300 interviews with firms more than 10 years old
- All quotas to run from questionnaire (S7)

SCREENER

ASK ALL Could I please speak to either the owner or someone responsible for your firm’s strategy in relation to overseas business?

Good morning/afternoon, my name is ... and I am calling on behalf of OMB Research, an independent market research agency. We have been commissioned by UK Trade & Investment and the Department for Business, Innovation & Skills (BIS) to conduct a survey of businesses on the topic of doing business overseas.

IF NECESSARY We are interested in talking to firms who are either involved in any form of overseas business activity or who are seriously considering doing business overseas in the next year. This overseas business activity could include selling directly to customers based overseas, selling overseas through agents or distributors, licensing, franchising or joint venturing overseas, or operating your own overseas office or site.

INTERVIEWER NOTE - YOU MAY TAKE REFERRALS TO ANOTHER SITE WITHIN THE UK.

INTERVIEWER NOTE – IF FIRM IS NOT CURRENTLY DOING BUSINESS OVERSEAS, BUT PLANNING DOING SO WITHIN THE NEXT YEAR CONTINUE WITH THE INTERVIEW ON THIS BASIS

This research will cover areas such as your current and planned overseas activities, including the way you go about doing business overseas and any issues you may have faced. It will take around 15-20 minutes, depending on your answers. It doesn't matter how much or how little overseas business you do – we're interested in speaking to a range of firms about their experiences.

AS NECESSARY UKTI is responsible for helping UK firms do business overseas. They want to find out more about how firms are going about overseas business and any difficulties they have. This will help UKTI develop the type of help they offer to UK firms. We are able to offer all businesses taking part in this research an electronic link to a summary report of the research findings (which will be available later this year).

Is it convenient to speak to you now or would you prefer to make an appointment for another time?

The research is being conducted under the Code of Practice of the Market Research Society, which means that all of the answers you give are strictly confidential and anonymous. Participation in this survey is voluntary.

The responses of all organisations taking part will be combined into a statistical report.

Your organisation was selected at random from a list of UK businesses held by a commercial list broker.

If you wish to check that OMB Research is a bona fide market research agency, you can contact the Market Research Society on 0500 396999, or call James Murray at OMB Research on 01622 790900 or Heather Booth di Giovanni at UK Trade & Investment on 020 7215 4989.

Can I confirm that you are one of the people best qualified to talk about your company’s overseas business activity?

INTERVIEWER NOTE: IF KNOW ALREADY THAT YOU ARE SPEAKING TO THE CORRECT PERSON THEN CODE YES AUTOMATICALLY

REFERRALS CAN BE TAKEN TO ANY UK SITE WHEN THE CONTACT FEELS THAT THERE IS SOMEONE WITHIN THE COMPANY BETTER PLACED TO ANSWER QUESTIONS ON THE TOPIC AREAS OUTLINED

Yes ..................................................................................1 No – take referral and being transferred ..........................2 No – take referral and arrange call back ..........................3 No – refused referral ........................................................4

Which of the following overseas business activities has your firm been involved in, over the last 5 years? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

Selling directly to overseas customers .................................1 Selling to overseas customers through agents or distributors....2 Licensing or franchising overseas, or other contractual arrangements such as joint ventures ........................................3 Operating your own overseas site or office ..........................4 (None of these)...........................................................................5 (Don’t know) ...............................................................................6 – CLOSE IF NONE AT S2a (CODE 5) S2b – Are you seriously considering starting to conduct overseas business via any of these routes in the NEXT YEAR?

Yes .................................................................................................................1 No ..................................................................................................................2 - CLOSE (Don't know) ...............................................................................................3 - CLOSE

IF JUST CONSIDERING OVERSEAS BUSINESS (CODE 1 AT S2b) S2c – Which of the following overseas business activities are you planning to become involved in, in the next year? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

Selling directly to overseas customers .........................................................1 Selling to overseas customers through agents or distributors..................2 Licensing or franchising overseas, or other contractual arrangements such as joint ventures .........................................................3 Operating your own overseas site or office ..............................................4 (None of these) ..........................................................................................5 – CLOSE (Don't know) .............................................................................................6 – CLOSE

S4a – DELETED S4b – DELETED

IF CODE 4 AT S2a S5b – \<IF CODES 1, 2 OR 3 ALSO MENTIONED AT S2a You mentioned operating your own overseas office or site. > How many overseas sites do you have? READ OUT

One ..............................................................................................................1 2-5 ..............................................................................................................2 6-10 .........................................................................................................3 11-20 ......................................................................................................4 21-50 ......................................................................................................5 More than 50 ..........................................................................................6 (Don't know) ..........................................................................................7 (Refused) ...............................................................................................8 IF CODE 1 AT S5b OR (OR CODE 4 AT S2c & CODE 5 AT S2a) S5c1 – < IF CODE 4 AT S2c & CODE 5 AT S2a & CODES 1, 2 OR 3 ALSO MENTIONED AT S2c You mentioned operating your own overseas office or site. > Would you say that the MAIN purpose of this site < IF CODE 1 AT S5b is IF CODE 4 AT S2c & CODE 5 AT S2a will be > …? READ OUT – AIM FOR SINGLE CODE BUT MULTI ALLOWED

IF CODES 2-8 AT S5b S5c2 – Thinking about all of your overseas sites, do any of these have the following purposes? READ OUT – CODE ALL THAT APPLY

- Manufacturing or assembly ........................................ 1
- Call centre ..................................................................... 3
- Distribution or sales office ........................................... 4
- Service delivery ............................................................ 6
- Research, product or process development.................. 7
- (Don't know/None of these) ........................................... 97 – CLOSE IF ONLY CODE 4 AT S2a/S2c ((S2a=4 & S2a=Not 1, 2 OR 3) OR (S2a=5 & S2c=4 & S2c=Not 1, 2 or 3))

ASK ALL S6a – And can I just check, < IF CODES 1-4 AT S2a AND CODE 1 AT S5c other than from the manufacturing or assembly site that you've just mentioned > have you IMPORTED any goods or services over the last 5 years?

AS NECESSARY By importing I mean the buying in of goods or services from overseas suppliers.

- Yes .................................................................................. 1
- No .................................................................................... 2
- (Don't know) .................................................................... 3

IF CODE 1 AT S6a & NOT CODE 4 AT S2a From now on, when I'm asking questions about your overseas business activity please DO NOT include importing.

ASK ALL S7 – And how long ago was your business established in the UK? READ OUT – CLARIFY AS NECESSARY – THIS MEANS WHEN THE BUSINESS IN ITS CURRENT FORM STARTED TRADING AS NECESSARY – IF THE BUSINESS IS A SUBSIDIARY THIS REFERS TO THE SUBSIDIARY IN WHICH YOU WORK

- Within the last year ......................................................... 1
- Over 1, up to 2 years ago .................................................. 2
- Over 2, up to 3 years ago .................................................. 3
- Over 3, up to 4 years ago .................................................. 4
- Over 4, up to 5 years ago .................................................. 5
- Over 5, up to 10 years ago ............................................... 6
- Over 10, up to 20 years ago ............................................. 7
- Over 20 years ago ........................................................... 8
- (Not yet trading) .............................................................. 9
- (Don't know) .................................................................. 10 - CLOSE (Refused)........................................................................................................11 - CLOSE ASK IF ESTABLISHED 1-2 YEARS (CODES 1-2 AT S7) S7b – Can I just check, has your business actually started trading yet?

Yes ...................................................................................1 No ...................................................................................2 (Don’t know) .....................................................................3

ASK ALL H1b – Is the business UK or foreign-owned?

UK-owned........................................................................1 Foreign-owned .................................................................2 (Joint UK and foreign-owned)...........................................3 (Don’t know) .....................................................................4

READ OUT IF FOREIGN OWNED (CODES 2-3 AT H1b) For the rest of this interview, please just answer about the firm where you work, and not your parent company or any other group companies. So when I ask about your overseas business, please just focus on the overseas activities of your UK firm.

ASK ALL S8 – And what is the main activity of the business? PROBE FULLY FOR INDUSTRY TYPE - IF MANUFACTURING WHAT TYPE OF MANUFACTURING, IF FINANCIAL SERVICES WHAT KIND AND SO FORTH

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just tell me the activity of your UK firm, not your parent company

A – Agriculture, hunting & forestry.................................1 B – Fishing ........................................................................2 C – Mining & quarrying.....................................................3 D – Manufacturing............................................................4 E – Electricity, gas and water supply.................................5 F – Construction...............................................................6 G – Retail, wholesale & repair of motor vehicles...............7 H – Hotels and catering.....................................................8 I - Transport, storage and communication........................9 J - Financial intermediation (Finance)...............................10 K - Real estate, renting & business activities ....................11 L - Public administration and defence ..............................12 M – Education ....................................................................13 N - Health and social work .................................................14 O - Other community, social & personal service activities ....15 Other ..................................................................................96 (Don’t know) .....................................................................97 (Refused)............................................................................98

CATI TO INSERT TIME MARKER SECTION A – OVERSEAS BUSINESS ACTIVITY

ASK IF CODES 1-4 AT S2a UNLESS NOT YET TRADING OR ESTABLISHED \<1 YEAR (CODES 1 OR 9 AT S7 OR CODE 2 AT S7b)

A4 – And how long ago did your company start conducting business overseas? READ OUT AS NECESSARY

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

INTERVIEWER NOTE: IF RESPONDENT SAYS THEY’VE NOT YET STARTED DOING BUSINESS OVERSEAS THEN YOU NEED TO GO BACK TO S2a AND CHANGE TO ‘NONE OF THESE’ & THEN ASK S2b & S2c

CATI TO ONLY SHOW FEASIBLE CODES BASED ON ANSWER TO S7

Within the last year........................................................... 1 Over 1, up to 2 years ago.................................................. 2 Over 2, up to 3 years ago.................................................. 3 Over 3, up to 4 years ago.................................................. 4 Over 4, up to 5 years ago.................................................. 5 Over 5, up to 10 years ago............................................... 6 Over 10, up to 20 years ago............................................. 7 Over 20 years ago............................................................ 8 (Don’t know) ..................................................................... 9 (Refused).......................................................................... 10

ASK IF CODES 1-4 AT S2a

G5 – Which of the following regions of the world are you currently doing business in? < IF IMPORTER (CODE 1 AT S6a & NOT CODE 4 AT S2a) (but please DO NOT include countries that you have only imported from)> READ OUT. CODE ALL THAT APPLY

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just answer about the areas where your UK firm is doing business, but don’t include the activity of your parent company or any other group companies

Europe.............................................................................. 1 North America ................................................................. 3 South America & Latin America ....................................... 4 The Middle East & Africa............................................... 6 Asia Pacific....................................................................... 7 (Don’t know) ..................................................................... 9 ASK IF CODES 1-4 AT S2a A1b – How many overseas countries have you done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since your were established >, in any form < IF IMPORTER (CODE 1 AT S6a & NOT CODE 4 AT S2a) (although please DO NOT include countries that you have only imported from)>? READ OUT

One...................................................................................2 2-5 ....................................................................................3 6-10 ..................................................................................4 11-20 ................................................................................5 21-50 ................................................................................6 More than 50 .......................................................................7 (Don't know) .......................................................................8 (Refused)...........................................................................9

IF CODE 2 AT A1b A2 – Which country was this? WRITE IN

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY).............................................................. (Don't know) - CLOSE

ASK IF CURRENTLY EXPORTING (S2a=1-4) G7 – Over the next 3 years do you expect the number of countries in which you do business to increase, decrease or stay the same?

Increase............................................................................1 Decrease ...........................................................................2 Stay the same ....................................................................3 (Don't know) .....................................................................4

IF ONLY ACTIVITY IS A MANUFACTURING/CALL CENTRE OVERSEAS SITE (CODE 4 AT S2a & CODES 1 OR 3 AT S5c & NOT CODES 1-3 AT S2a) A5a – Can I just check, have you made any sales at all to customers in overseas countries in the last year?

Yes ..................................................................................1 No.....................................................................................2 (Don't know) .....................................................................3 A5b – DELETED

ASK IF CODES 1-4 AT S2a EXCEPT CODES 2-3 (NO/DON'T KNOW) AT A5a OR NOT YET TRADING (CODE 9 AT S7 OR CODE 2 AT S7b)

A5c – In the last financial year, approximately what percentage of your turnover was accounted for by overseas sales? READ OUT AS NECESSARY

IF CODE 3 AT S2a AS NECESSARY: Please include any fees received from overseas companies or overseas licensing deals.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

Up to 5% .................................................................1 6 - 10% .................................................................2 11 - 15% ...............................................................3 16 – 25% ...............................................................4 26 – 50% ...............................................................5 51 – 75% ...............................................................6 More than 75% ......................................................7 (Don't know) ..........................................................8 (Refused) .............................................................9

ASK ALL EXCEPT CONSIDERS ONLY (S2a=5 & S2c=1-4)

A5d – In a year’s time, do you think that the percentage of your turnover accounted for by overseas sales will be higher than it is now, lower or about the same?

Higher .................................................................1 Lower .................................................................2 About the same ....................................................3 (Don't know) ........................................................4 (Refused) ............................................................5 ASK ALL A7 - I’m going to read out some possible benefits of doing business overseas, and I’d like you to tell me whether \<IF EXPORTING (S2a=1-4) each one applies to your business / IF NOT EXPORTING (S2b=1) you would expect to benefit in these ways when you start doing business overseas>. So firstly...

ON EACH OF THE A7 SCREENS SHOW (AT TOP): \<IF EXPORTING (S2a=1-4) Has doing business overseas... / IF NOT EXPORTING (S2a=1) Do you think that doing business overseas will...>

ORDER OF STATEMENTS TO BE RANDOMISED (a) \<IF S2a=1-4 Enabled / IF S2b=1 Enable> you to achieve a level of growth otherwise not possible? (b) \<IF S2a=1-4 Allowed / IF S2b=1 Allow> you to more fully utilise your existing capacity? (c) DELETED (d) \<IF S2a=1-4 Exposed / IF S2b=1 Expose> you to new ideas? (e) \<IF S2a=1-4 Increased / IF S2b=1 Increase> the commercial life span of any of your products or services? (f) DELETED

Yes ...................................................................................1 No ...................................................................................2 (Don’t know) ....................................................................3

ASK FOR EACH OF A7a-f THAT HAS BEEN A BENEFIT. ASK A8 DIRECTLY AFTER EACH A7 STATEMENT A8 - And to what extent do you feel that this \<IF S2a=1-4 has been / IF S2b=1 will be> a benefit of doing business overseas? Please give me a score of 1 to 5, where 5 means to a critical extent and 1 means to no extent. READ OUT AS NECESSARY

1 – To no extent ...............................................................1 2 ......................................................................................2 3 ......................................................................................3 4 ......................................................................................4 5 - To a critical extent ......................................................5 (Don’t know) ....................................................................6

ASK ALL A9a – Overall, \<IF S2a=1-4 would you say that your experiences of doing business overseas have led / IF S2b=1 do you think that doing business overseas will lead> you to...? READ OUT. CODE ALL THAT APPLY.

Develop any new products or services...........................................................1 Make changes or modifications to any of your existing products or services. 2 (None of these).........................................................................................3 (Don’t know) ..........................................................................................4 IF CHANGED PRODUCTS/SERVICES (CODE 2 AT A9a)

C1d – < IF CODES 1-4 AT S2a Were these changes or modifications IF CODE 1 AT S2b Are you expecting these changes or modifications to be > ...? READ OUT - MULTICODE

Something cosmetic such as packaging or translation ....1 Or something more fundamental.................................2 (Non of these)..............................................................3 (Don't know) .................................................................4

IF CURRENTLY EXPORTING & DEVELOPED OR CHANGED PRODUCTS/SERVICES (S2a=1-4 & A9a=1-2)

A9b – \<IF CODES 1 & 2 AT A9a Thinking about both the new products or services you've developed and the changes you've made to existing products or services, was this / IF JUST CODE 1 AT A9a OR JUST CODE 2 AT A9a And was this product or service development > designed specifically for overseas customers, UK customers or both?

Overseas .................................................................1 UK ..............................................................................2 Both ...........................................................................3 (Don't know) .................................................................4

IF OVERSEAS (CODE 1 OR 3 AT A9b)

A9c –And did you undertake this for any of the following reasons? READ OUT. CODE ALL THAT APPLY

To comply with specific regulations or legal requirements in overseas countries .. 1 To solve technical or practical issues that related to particular overseas countries 2 To take account of different cultures or consumer preferences overseas .......... 3 In response to specific requests from overseas customers .................................. 4 (Non of these) ........................................................................ 5 (Don't know) ........................................................................ 6

IF HAVE NOT DEVELOPED OR CHANGED PRODUCTS/SERVICES (CODES 3-4 AT A9a)

A9d – Can I just check, does your firm carry out or commission any product or service development? AS NECESSARY: This includes improving existing products or services as well as designing new products or services

Yes ..............................................................................1 No ..............................................................................2 (Don't know) .................................................................3 ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A10 –\<IF S2a=1-4 Has doing business overseas prompted / IF S2b=1 Do you think that doing business overseas will prompt > you to invest more time or money in product or service development?

Yes ...................................................................................1 No .....................................................................................2 (Don't know) ........................................................................3

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A11 – And \<IF S2a=1-4 has doing business overseas increased / IF S2b=1 do you think that doing business overseas will increase > the amount of money you have available to invest in product or service development?

Yes ...................................................................................1 No .....................................................................................2 (Don't know) ........................................................................3

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A12 – And in your view, \<IF S2a=1-4 has doing business overseas increased / IF S2b=1 will doing business overseas increase > the return on investment that you get from your product or service development?

Yes ...................................................................................1 No .....................................................................................2 (Don't know) ........................................................................3

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A13 – Now I’d like you to think specifically about the effect of the recent economic downturn on any product or service development that you undertake. Would you say that the downturn has meant you are…?

Spending more on product or service development........1 Spending less........................................................................2 Or, has it had no impact .......................................................3 (Don't know) ........................................................................4

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A14 – And as a result of the downturn would you say that you are…?

Doing more product or service development for overseas customers 1 Doing less product or service development for overseas customers ..2 Or, has there been no change..................................................3 (Don't know) ........................................................................4

CATI TO INSERT TIME MARKER SECTION C – DRIVERS OF MARKET

IF DOING BUSINESS IN MORE THAN ONE MARKET (A1b=3-9)

B4 – Thinking now about all the overseas countries that you have done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since you were established >, which of these was the most challenging country to do business in? RECORD ONE COUNTRY ONLY

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY).............................................................. (None/Don’t know)

IF NONE/DON’T KNOW AT B4 OR IF ONLY CONSIDERING EXPORTING (S2b=1)

B5 – Which overseas country \<IF B4=NONE/DK have you started doing business in most recently / IF S2b=1 are you likely to do business in first >? RECORD ONE COUNTRY ONLY IF NOT SURE ASK RESPONDENT TO JUST CHOOSE ONE OF THE COUNTRIES THAT THEY DO BUSINESS IN (E.G. THE ONE THEY KNOW MOST ABOUT)

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY)..............................................................

CATI TO ALLOCATE <MARKET> AS FOLLOWS: • FROM B4: IF MORE THAN ONE MARKET (A1b=3-9) AND MARKET PROVIDED AT B4 • FROM B5: IF MORE THAN ONE MARKET (A1b=3-9) & NONE/DON’T KNOW AT B4 • FROM B5: IF ONLY CONSIDERING EXPORTING (S2b=1) • FROM A2: IF ONLY ONE MARKET (A1b=2)

READ OUT FOR ALL I’d like to ask you some questions now about your < IF S2a=1-4 experience of doing business in / IF S2b=1 plans in relation to > <MARKET>.

IF CODES 1-4 AT S2a UNLESS NOT YET TRADING OR ESTABLISHED \<1 YEAR (CODES 1 OR 9 AT S7 OR CODE 2 AT S7b) OR UNLESS DOING BUSINESS OVERSEAS FOR \<1 YEAR (CODE 1 AT A4)

C1a – How long have you been doing business in < MARKET >? READ OUT AS NECESSARY – CATI TO ONLY SHOW FEASIBLE CODES BASED ON ANSWER TO A4

Less than a year...............................................................1 Over 1, up to 2 years......................................................2 Over 2, up to 3 years......................................................3 Over 3, up to 4 years......................................................4 Over 4, up to 5 years......................................................5 Over 5, up to 10 years.....................................................6 Over 10, up to 20 years...................................................7 Over 20 years..................................................................8 (Don’t know)..................................................................10 (Refused).......................................................................11 ASK ALL C4 - Please can you tell me the extent to which each of the following applied to you when you were FIRST CONSIDERING doing business in <MARKET>.

Please give me a score of 1 to 5, where 5 means that it is completely applicable and 1 means that it is not at all applicable. So firstly...READ OUT - RANDOMISE

(a) You had received an approach from someone in <MARKET> (b) DELETED (c) There was someone within your company who already had experience of <MARKET> (d) DELETED (e) DELETED

ADD TO SCREEN FOR EACH To what extent did that apply to you when you were FIRST CONSIDERING doing business in <MARKET>?

1 – Not at all applicable ....................................................1 2 ......................................................................................2 3 ......................................................................................3 4 ......................................................................................4 5 – Completely applicable ...............................................5 (Don’t know) .................................................................6

ASK IF ONLY DONE BUSINESS IN ONE MARKET (CODE 2 AT A1b) OR IF ONLY USE ONE MODE (ONLY ONE OF CODES 1-4 SELECTED AT S2a) B9 – Based on what you told me earlier about your overseas business, I believe that you do business in <MARKET> by... CATI TO LIST ALL OF THE FOLLOWING THAT APPLY

• IF S2a=1: Selling direct to customers. • IF S2a=2: Selling through agents or distributors. • IF S2a=3: Licensing, franchising or other contractual arrangements (such as joint ventures). • IF S2a=4: Operating your own site or office in <MARKET>.

Is that correct or do you do business in <MARKET> in any different ways?

Yes – correct ..............................................................................1 No – use different ways ..............................................................2 (Don’t know) ...............................................................................3 ASK IF DOING BUSINESS IN >1 MKT & USE MORE THAN 1 MODE (CODES 3-9 AT A1b & MORE THAN ONE OF CODES 1-4 SELECTED AT S2a) OR JUST CONSIDERING OVERSEAS BUSINESS (CODE 1 AT S2b) OR INFO WRONG AT B9 (CODE 2 AT B9)

B7 – In which of the following ways < IF S2a=1-4 have you done / IF S2b=1 are you planning to do > business in <MARKET>? READ OUT – CODE ALL THAT APPLY – DO NOT RANDOMISE

Selling directly to customers in <MARKET>...............................1 Selling through agents or distributors in <MARKET>....................2 Licensing, franchising or other contractual arrangements such as joint ventures .................................................................3 Operating your own site or office in <MARKET>.........................6 (None of these)...........................................................................7 (Don't know)..............................................................................8

IF OVERSEAS SITE (CODE 6 AT B7)

B8 – Would you say that the MAIN purpose of this site in <MARKET> < IF CODES 1-4 AT S2a is IF CODE 1 AT S2b will be > ...? READ OUT. SINGLE CODE

INTERVIEWER NOTE: IF THE FIRM HAS SEVERAL SITES IN THIS COUNTRY ASK THEM THE PURPOSE OF THEIR MOST IMPORTANT SITE

Manufacturing or assembly ................................................. 1 Call centre ............................................................................. 3 Distribution or sales office .................................................... 4 Service delivery ..................................................................... 6 Research, product or process development.......................... 7 (Don't know/None of these)..................................................... 8

MODE REFERENCES M1 - Selling direct (B7=1 OR (S2a=1 & B9=1)) M2 - Selling through agents/distributors (B7=2 OR (S2a=2 & B9=1)) M3 – Licensing, franchising, other contractual (B7=3 OR (S2a=3 & B9=1)) M4 – DELETED M5 – DELETED M6 – Production site ((B7=6 & B8=1) OR (S5c=1 & B9=1)) M7 – Call centre (B7=6 & B8=3) OR (S5c=3 & B9=1)) M8 – Sales/service site (B7=6 & B8=4-6) OR (S5c=4-6 & B9=1)) M9 – R&D site (B7=6 & B8=7) OR (S5c=7 & B9=1)) M10 – Unknown site (B7=6 & B8=8) OR (S5c=97 & B9=1)) M11 – Unknown mode (B7=7-8)

IF M6, 7 OR 9

C1b – Can I just check, < IF CODES 1-4 AT S2a does your IF CODE 1 AT S2b will this > site in < MARKET > sell any products or services directly to any customers in < MARKET >? READ OUT

Yes .............................................................................................1 No...............................................................................................2 (Don't know)..............................................................................3

CATI TO INSERT TIME MARKER SECTION E – BARRIERS

ASK IF CURRENTLY EXPORTING (S2a=1-4)

E1 – I’m now going to read out a list of issues that you may have had to tackle when trying to develop your business in <MARKET>. For each one, please give me a score of 1 to 5 for the extent to which you feel that this has been a difficulty, where 5 means it has been ‘extremely difficult’ and 1 means it has ‘not been at all difficult’.

So firstly... READ OUT ROTATE LIST BUT ALWAYS ASK B, C & D IN ORDER

ON EACH OF THE E1 SCREENS (AT BOTTOM) AS NECESSARY To what extent has this been a difficulty in <MARKET> (where 5 means it has been ‘extremely difficult’ and 1 means it has ‘not been at all difficult’)

(a) Obtaining basic information about doing business in <MARKET> (b) Identifying who to make contact with in the first instance < IF M2-3 or finding a suitable partner > (c) Establishing an initial dialogue with prospective < IF M1, M3, M8, M10, M11 OR YES AT C1b customers or > business partners in <MARKET> (d) Building relationships with key influencers or decision-makers (h) DELETED (i) < IF M1-3, M8, M10, M11 OR YES AT C1b A preference on the part of customers in <MARKET> for doing business with firms from <MARKET> (k) Finding the necessary management time to devote to doing business in <MARKET> (n) DELETED (p) DELETED (r) Dealing with legal or tax regulations or standards in <MARKET> (s) Negotiating the culture and language (t) Protecting your intellectual property (u) DELETED (v) DELETED (w) Ensuring you get paid and enforcing contracts (x) Dealing with customs procedures or paperwork

1 – Not at all difficult .................................................................1 2 ......................................................................................2 3 ......................................................................................3 4 ......................................................................................4 5 – Extremely difficult ......................................................5 (Don’t know) .....................................................................6

CATI TO INSERT TIME MARKER SECTION G – DIVERSIFICATION & EMERGING/FAST GROWING MARKETS

G6 – DELETED

READ OUT TO ALL I'm now going to ask you about the extent to which you see there being opportunities for YOUR FIRM in some of the world's fast growing and emerging economies over the next 2 years.

ASK ALL G1 – For each of these countries please could you tell me whether you are already doing business there, you are very likely to, you are quite likely to, or you are unlikely to do business there in the next 2 years.

So firstly, ... DO NOT ROTATE ORDER

a) Russia b) Turkey c) South Africa d) Saudi Arabia or the United Arab Emirates e) Brazil f) Mexico g) DELETED h) China i) India j) DELETED

AS NECESSARY Are you...?

Already doing business there ........................................................1 Very likely ......................................................................................2 Quite likely ....................................................................................3 Or, unlikely to do business there in the next 2 years.....................4 (Don't know) .................................................................................5

ASK ALL UNLESS 'UNLIKELY' (CODE 4) TO ALL OPTIONS AT G1 G4b– And has the economic downturn prompted you to devote more attention to any of the emerging or fast growing economies I've just mentioned?

Yes ....................................................................................1 No ....................................................................................2 (Don't know) .................................................................................3 ASK ALL G7c – Thinking about the recent decline in Sterling exchange rates, overall would you say that this has had...? READ OUT. SINGLE CODE

A positive impact on your business.................................1 A negative impact..........................................................3 Or, no impact on your business........................................5 (Don't know) .....................................................................6

ASK ALL G7d – If the Sterling exchange rates stay at a similar level or fall further, do you think that this will prompt you to try and increase the share of your business that is accounted for by overseas sales? SINGLE CODE.

Yes ...................................................................................1 No.....................................................................................3 (Don't know) ....................................................................4 (Refused)..........................................................................5

ASK ALL G8a – Can I just check, \<IF S2a=1-4 does your firm ever / IF S2b=1 when you start doing business overseas are you planning to> use export credit insurance?

INTERVIEWER NOTE: IF RESPONDENT DOES NOT KNOW WHAT EXPORT CREDIT INSURANCE IS THEN CODE AS ‘NO’

Yes ...................................................................................1 No.....................................................................................2 (Don't know) ....................................................................3

IF EXPORTING & USE EXPORT CREDIT INSURANCE (S2a=1-4 & G8a=1) G8b – And over the last 6 months, have you had any difficulties in accessing export credit insurance?

Yes ...................................................................................1 No.....................................................................................2 (Don't know) ....................................................................3 (Refused)..........................................................................4

ASK ALL G10a – Over the last 6 months, has your business had any difficulties in obtaining finance, either from within the company or from external sources?

Yes ...................................................................................1 No.....................................................................................2 (Don't know) ....................................................................3 (Refused)..........................................................................4 IF DIFFICULTIES ACCESSING FINANCE (G10a=1) G10e – Have these difficulties obtaining finance had any negative impact on the scale or scope of your <IF S2b=1 planned> overseas activities? SINGLE CODE.

Yes ................................................................................... 1 No ..................................................................................... 3 (Don't know) .................................................................... 4

IF DIFFICULTIES ACCESSING FINANCE (G10a=1) G10f – And have these difficulties obtaining finance had any negative impact on the scale or scope of your product or service development activity? SINGLE CODE.

Yes ................................................................................... 1 No ..................................................................................... 3 (Don't know) .................................................................... 4

CATI TO INSERT TIME MARKER I'd now like to ask you some questions about any sources of information or advice you are aware of that are available to help UK firms do business overseas.

**ASK ALL**

**F2 – Prior to this interview, had you heard of...? READ OUT**

(a) UK Trade & Investment or UKTI (b) The commercial services provided by British embassies and consulates overseas (c) DELETED (d) DELETED

Yes .................................................................1 No .................................................................2 (Don't know) ..................................................3

**IF YES AT ANY OF F2a-b**

**F2i – And have you used \<IF F2a=1 & F2b=2-3 UK Trade & Investment / IF F2a=2-3 & F2b=1 the commercial services provided by British embassies and consulates overseas / IF F2a=1 & F2b=1 either of these>?**

Yes .................................................................1 No .................................................................2 (Don't know) ..................................................3

**ASK ALL**

**F2k – And have you used Business Link?**

**IF NECESSARY:** Business Link is a free business advice and support service, available online and through local advisors

Yes .................................................................1 No .................................................................2 (Don't know) ..................................................3

**IF NOT USED BL (CODES 2-3 AT F2k)**

**F2j – Prior to this interview, had you heard of Business Link?**

**IF NECESSARY:** Business Link is a free business advice and support service, available online and through local advisors

Yes .................................................................1 No .................................................................2 (Don't know) ..................................................3

**IF AWARE OF BL BUT NOT USED (F2j=1)**

**F2l – Do you think you will use Business Link in future? READ OUT. SINGLE CODE**

Yes .................................................................1 No .................................................................2 (Don't know) ..................................................5 CATI TO INSERT TIME MARKER I'd now like to ask you some questions about your business just to classify your answers for analysis purposes.

ASK ALL

H2a – How many people are currently employed by your business in the UK?

INTERVIEWER NOTE AS NECESSARY Please include both full and part-time staff.

Write in number (0+): (Don't know) – PROMPT WITH RANGES (Refused)

IF DON'T KNOW AT H2a

H2b – If you had to estimate, approximately how many people are employed by your business in the UK? READ OUT AS NECESSARY

No employees ................................................................. 1 1-4 ................................................................................. 2 5-9 ................................................................................. 3 10-19 ............................................................................. 4 20-49 ............................................................................. 5 50-99 ............................................................................. 6 100-199 ......................................................................... 7 200-249 ......................................................................... 8 250-499 ......................................................................... 9 500 or more .................................................................... 10 (Don't know) ................................................................. 11 (Refused)........................................................................ 12

ASK ALL EXCEPT CODES 1, 2, 3 & 9 AT S7 OR CODE 2 AT S7b

H2c – Compared to this time three years ago, would you say that the number of people employed by your company is now...? READ OUT

Higher ............................................................................. 1 Lower .............................................................................. 2 Or, about the same as it was three years ago.................. 3 (Don't know) ................................................................. 4

IF HIGHER (CODE 1 AT H2c) & FIGURE GIVEN AT H2a

H2d – How many people were employed by your business three years ago? READ OUT

INTERVIEWER NOTE AS NECESSARY Please include both full and part-time staff.

Write in number (0+): (Don't know) (Refused) IF DON'T KNOW/REFUSED AT H2d OR (HIGHER (CODE 1 AT H2c) & NO FIGURE GIVEN AT H2a I.E. DON'T KNOW/REFUSED)

H2e – Over the last three years would you say that the number of people employed by your company has...? READ OUT

- Increased by more than 75% .....................................................1
- Increased by between 30-75%...................................................2
- Or, increased by less than 30% compared to 3 years ago...........3
- (Don't know) ...............................................................................4

H3a – DELETED

ASK ALL

H3b –< IF S7=NOT 1 & NOT 9 AND S7b=NOT 2 Can I just ask, what is the current annual turnover of your business? / IF S7=1 OR 9 OR S7b=2 What do you anticipate will be the turnover of your business in the first year of trading?> Would you say it is...? READ OUT

AS NECESSARY By this I mean your annual sales, income or receipts.

IF FOREIGN OWNED (CODES 2-3 AT H1b):

AS NECESSARY: Please just focus on your UK firm, not your parent company

- £0 ...................................................................................1
- £100,000 or less...............................................................2
- £100,001 - £500,000 ........................................................3
- £500,001 - £2million .........................................................4
- £2million - £10million.......................................................5
- £10million - £50million.....................................................6
- More than £50million.......................................................7
- (Don't know) .....................................................................8
- (Refused)..........................................................................9

ASK ALL EXCEPT CODES 1, 2, 3 & 9 AT S7 OR CODE 2 AT S7b

H3c – Compared to this time three years ago, would you say that your turnover is now ...? READ OUT

- Much higher.................................................................1
- A bit higher .................................................................2
- Lower.............................................................................3
- Or, about the same as it was three years ago...............4
- (Don't know) .................................................................5

ASK ALL UNLESS ESTABLISHED IN LAST TWO YEARS (I.E. NOT 1-2 OR 9 AT S7 & NOT CODE 2 AT S7b)

H7a – Have you introduced any new products or services over the last three years?

- Yes ..................................................................................1
- No....................................................................................2
- (Don't know) .....................................................................3 ASK IF YES AT H7a H7b - And are these new products or services... READ OUT - SINGLE CODE ADD AS NECESSARY: By completely new I mean that, to the best of your knowledge, they have not been introduced by anyone before you READ OUT – SINGLE CODE

Just new to your business................................................................. 1 New to your industry or sector .......................................................... 2 Or, are they completely new to the world........................................... 3 (Some are just new to the business and some are completely new)........ 4 (Don’t know).................................................................................... 5

ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b H4a – Approximately how many of your UK employees are engaged either wholly or partly in R&D activity? READ OUT AS NECESSARY

AS NECESSARY: By R&D I mean ‘research and development’

Zero .............................................................................................. 1 One ............................................................................................... 2 2-4 ............................................................................................... 3 5-9 ............................................................................................... 4 10-19 ........................................................................................... 5 20-49 ........................................................................................... 6 50-99 ........................................................................................... 7 100-199 ...................................................................................... 8 200-249 ...................................................................................... 9 250-499 ...................................................................................... 10 500 or more .................................................................................. 11 (Don’t know) ................................................................................ 12 (Refused)..................................................................................... 13

ASK IF H4a IS CODES 2-11 H4b – Can I just check, are any of these employees involved in activities that could be described as ‘the development of scientific or technical knowledge that is NOT commonly available’?

Yes .............................................................................................. 1 No ............................................................................................... 2 (Don’t know) ................................................................................ 3 ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b OR CODE1 AT H4a

H5 – And approximately how many of your UK employees are engaged either wholly or partly in new product or service development? READ OUT AS NECESSARY

Zero..................................................................................1 One...................................................................................2 2-4 ....................................................................................3 5-9 ....................................................................................4 10-19 ................................................................................5 20-49 ................................................................................6 50-99 ................................................................................7 100-199 ............................................................................8 200-249 ............................................................................9 250-499 ............................................................................10 500 or more......................................................................11 (Don't know) .....................................................................12 (Refused)..........................................................................13

ASK ALL EXCEPT CODES 2, 3 OR 4 AT H7b OR (CODE 1 AT H4b & CODES 3-11 AT H4a & CODES 3-11 AT H5)

H6 – In the last year have you commissioned anyone external to your business to conduct scientific or technical research, or any new product or service development activity for you?

Yes ..................................................................................1 No.....................................................................................2 (Don't know) .....................................................................3

Analysis

Innovative Firms

- ‘Innovative’ firms are those that...
  - Have more than one employee engaged in R&D activity (H4a) and more than one employee engaged in new product or service development (H5)
  - Or, have employed someone external to conduct new product or service development in the last year (H6)
  - Or, derive at least some turnover from products & services introduced in the last 3 years (H7a) except firms established in the last 2 years

Innovative Firms – Alternative (Tighter) Definition

- ‘Innovative’ firms (by the alternative measure) are those that...
  - Have more than one employee engaged in R&D activity (H4a) and more than one employee engaged in new product or service development (H5) and at least some R&D employees are engaged in the ‘development of scientific or technical knowledge that is not commonly available’ (H4b)
  - Or, have employed someone external to conduct new product or service development in the last year (H6)
  - Or, derive at least some turnover from products & services introduced in the last 3 years (H7a) except firms established in the last 2 years and these products & services are either ‘new to the world’ or ‘new to the industry/sector’ (H7b) ASK ALL H8b – Have you either applied for or obtained any patents, trademarks or other legal protection, either in the UK or overseas, for any of your products or services?

Yes ................................................................. 1 No ........................................................................ 2 (Don't know) ...................................................... 3

IF IP PROTECTION (CODE 1 AT H8b) H8c – And do these patents, trademarks or other legal protection relate to the UK or overseas countries? SINGLE CODE

UK ................................................................. 1 Overseas .......................................................... 2 Both ............................................................... 3 (Don't know) ...................................................... 4

ASK ALL H9a – Can I just check, do you have a current, written business plan?

Yes ................................................................. 1 No ........................................................................ 2 (Don't know) ...................................................... 3 (Refused) .......................................................... 4

ASK ALL EXCEPT ‘NOT YET TRADING’ (CODE 9 AT S7 OR CODE 2 AT S7b) H10 – Thinking about your business as a whole, what growth objectives do you have for the business over the next FIVE years? Do you plan to…? READ OUT

Remain the same size ........................................ 1 Become smaller ............................................... 2 Grow moderately ............................................. 3 Grow substantially ......................................... 4 (Don't know) ...................................................... 5 (Refused) .......................................................... 6

ASK IF CURRENTLY EXPORTING (S2a=1-4) UNLESS DO NOT SELL TO OVERSEAS CUSTOMERS (I.E. DO NOT ASK IF CODE 2 AT A5a) H18a – Thinking about your overseas customers, are these…? READ OUT. SINGLE CODE

Businesses ......................................................... 1 Individuals ....................................................... 2 Or both ............................................................ 3 (Other) ............................................................. 4 (Don't know) ...................................................... 5 ASK IF SELL TO BUSINESSES (CODES 1 OR 3 AT H18a) H18b – And are the businesses that you sell to the ‘end users’ of your products or services or are they part of the supply chain? AS NECESSARY: By ‘part of the supply chain’ I mean that they sell your products on to others, in either the same or modified form.

End users ........................................................................................................1 Part of supply chain......................................................................................2 Both ..............................................................................................................3 (Don't know) ..............................................................................................4

ASK IF SELL TO BUSINESSES & FOREIGN OWNED (CODES 1 OR 3 AT H18a & CODES 2-3 AT H1b) H18c – And do you sell to other firms within your group, firms that are not part of your group, or both? SINGLE CODE

AS NECESSARY: By ‘your group’ I mean your parent company and any other companies that they own

Just to firms in the group.................................................................1 Just to firms not in the group..........................................................2 Both ........................................................................................................3 (Don't know) .........................................................................................4

CATI TO INSERT TIME MARKER SECTION I – MARKETING

ASK ALL I1 – Finally, I'd just like to ask you a few questions about the types of media channels that you personally use and how useful these are to your business. So, do you get news or information that's relevant to your business from any of the following? READ OUT. CODE ALL THAT APPLY. DO NOT RANDOMISE ORDER

TV .................................................................1 National radio ..................................................2 Local radio .......................................................3 Trade press ......................................................4 National newspapers ........................................5 Local newspapers .............................................6 Magazines .......................................................7 Social networking sites ....................................8 Other websites ...............................................9 (None of these) ...............................................10 (Don't know) ..................................................11

IF CODES 1-9 AT I1 I2 – And how useful are each of these are as a source of news or information that is relevant to your business. Please answer on a scale of 1-5 where 5 is 'extremely useful' and 1 is 'not at all useful'. So firstly...? READ OUT.

CATI TO ONLY ASK FOR THOSE SELECTED AT I1

(a) TV (b) National radio (c) Local radio (d) Trade press (e) National newspapers (f) Local newspapers (g) Magazines (h) Social networking sites (i) <IF I1=8 Other> websites

ON EACH OF THE I2 SCREENS SHOW (AT BOTTOM): AS NECESSARY: How useful is this as a source of news or information for your business?

1 – Not at all useful ........................................1 2 .................................................................2 3 .................................................................3 4 .................................................................4 5 – Extremely useful .....................................5 (Don't know) .................................................6 I3a – DELETED

IF DO NOT USE SOCIAL NETWORKING (I1 IS NOT CODE 8) I3b – Do you expect to use any social networking sites for business purposes within the next year?

Yes ...................................................................................1 No.....................................................................................2 (Don't know) .................................................................3

ASK ALL I4 – During the last year, have you attended any business seminars, tradeshows or conferences?

Yes ...................................................................................1 No.....................................................................................2 (Don't know) .................................................................3

IF CODE 1 AT I4 I5 – How useful do you find these events as a source of information or news that is relevant to your business? AS NECESSARY: Please answer on a scale of 1-5 where 5 is 'extremely useful' and 1 is 'not at all useful'.

1 – Not at all useful...........................................................1 2 .......................................................................................2 3 .......................................................................................3 4 .......................................................................................4 5 – Extremely useful.........................................................5 (Don't know) .................................................................6

I6 – DELETED

ASK ALL I7 – Thinking about the various media channels I've just mentioned, if UK Trade & Investment wanted to let you know about a new service they were providing, what would be the best way to communicate this to you? SINGLE CODE. PROMPT AS NECESSARY.

AS NECESSARY: Please assume that UKTI don’t have your contact details, so wouldn’t be able to email or phone you

TV .................................................................1 National radio .............................................................2 Local radio ...............................................................3 Trade press ..............................................................4 National newspapers ..................................................5 Local newspapers ......................................................6 Magazines ...............................................................7 Social networking sites .............................................8 Other websites ........................................................9 Seminars, tradeshows or conferences .......................10 Other (SPECIFY) ....................................................11 (Don't know) ............................................................12 ASK ALL H14 – That’s the end of the interview, thank you very much for taking part. Would you be willing to take part in any future UK Trade & Investment research on this topic? AS NECESSARY If you say ‘yes’ you can always decline at the time if it’s not convenient.

Yes ................................................................................... 1 No ................................................................................... 2 (Don't know) ..................................................................... 3

ASK ALL H17a - We will be producing a summary report of the results from this survey. Would you like us to send you an electronic link to this summary report? READ OUT ADD AS NECESSARY The report will be available later this year.

Yes ................................................................................... 1 No ................................................................................... 2 (Don't know) ..................................................................... 3

IF YES AT H17a H17b - Can I take your e-mail address? AS NECESSARY: This will only be used to email you a link to the report and will not be passed on to anyone else

INTERVIEWER NOTE: PLEASE MAKE SURE YOU RECORD THE EMAIL ADDRESS CORRECTLY, & READ IT BACK TO THE RESPONDENT TO CHECK SPELLINGS ETC

Yes (WRITE IN) ................................................................ 1 No ................................................................................... 2 (Don't know) ..................................................................... 3

IF YES AT H17a BUT RESPONDENT DOESN’T HAVE AN EMAIL ADDRESS H17c – Can I confirm your postal address then and we will send you a letter containing the internet address for the electronic report?

.................................................................................................................... ....................................................................................................................

CATI TO INSERT TIME MARKER

ASK ALL H15 – Finally as proof of this interview please could I just confirm your business postcode? CATI TO DISPLAY POSTCODE IF AVAILABLE – AMEND IF MISSING OR INCORRECT

.................................

ASK ALL H16 – And may I take a note of your name? WRITE IN ................................................................. STANDARD THANK & CLOSE